News

Sharp fall in private rental listings means London’s housing pressures going from ‘bad to disastrous’

Monday, August 7, 2023 - London Councils

New research shows a 41% reduction in the number of London properties available for private rent since the Covid-19 pandemic, amid warnings that turbulence and supply constraints in the private rental market is worsening near record levels of homelessness across the capital.

The analysis – which represents the most comprehensive study yet published of London’s private rental market and its relationship to homelessness pressures – was undertaken jointly by the LSE and Savills and commissioned by a partnership led by the cross-party group London Councils. London Property Licensing participated in the advisory group for the research.

London’s buy-to-let market is contracting as landlords exit the sector which, coupled with the freeze to the Local Housing Allowance (LHA) and skyrocketing rents, is compounding the challenges faced by low-income households seeking affordable accommodation and by London boroughs working to prevent homelessness.

London Councils and the report’s co-funders – Trust for London, Capital Letters, and the London Housing Directors’ Group – say the research is the latest evidence of London’s broken housing market and the need for urgent government action to address rising homelessness. 

London Councils estimates that 166,000 Londoners are homeless and living in temporary accommodation arranged by their local borough. This figure is equivalent to the entire population of some London boroughs – or to the total number of residents of a city the size of Blackburn or Oxford.

On current trends, London will see its highest ever number of homeless households in temporary accommodation by the end of the summer. With boroughs in the capital collectively spending more than £52m each month on temporary accommodation and suitable accommodation for homeless households increasingly scarce, London Councils has branded the situation “unmanageable”.

Key findings from the LSE and Savills research include:

  • Rental listings have fallen across London, with the number of one, two, and three-bedroom properties listed for rent in both inner and outer London down by around 36% since the pandemic (comparing January-March 2023 to the January-March average across 2017-19).
  • Listings for four-bedroom properties declined the most. Over the same period, listings of four-bedroom properties almost halved (46.6%).
  • Across, one, two, three and four-bedroom properties the overall reduction is 41% down on the 2017-19 average. This reduction in the availability of private rental accommodation is higher in London, compared to a fall of 33% nationally.
  • At the same time, rental prices listed by London landlords (the ‘asking rents’) are 20% above their pre-Covid level in March 2020.
  • The buy-to-let market is contracting nationally and more private landlords in London are reducing rather than growing their portfolios. The number of rental properties being advertised for sale has more than doubled since the pandemic, and the proportion is rising. This has a clear impact on low-income households looking to rent, and on boroughs seeking temporary accommodation for homeless residents.

The researchers also investigated affordability for the 300,000 London households reliant on Local Housing Allowance (LHA) to meet their housing costs. Eligible households receive LHA as part of their housing benefit or Universal Credit payment if they have a private landlord, and the government has frozen LHA rates since April 2020.

In the face of fast-rising rents, the decision to keep LHA rates frozen has significantly reduced the number of properties affordable in London under LHA. Between January and March this year, only 2.3% of London listings on Rightmove in 2022-23 were affordable to those using the benefit to pay their rent – falling from 18.9% in 2020-21.

The Renters Reform Bill currently making its way through Parliament is expected to bring some positive changes to the private rented sector, including through banning Section 21 (‘no fault’) evictions of tenants.

However, London Councils and its partners are calling on ministers to take further measures to help low-income renters meet their housing costs and address homelessness pressures, including through raising LHA to cover at least 30% of local market rents and boosting investment in building more affordable homes.

Cllr Darren Rodwell, London Councils’ Executive Member for Regeneration, Housing & Planning, said:

This research is the latest evidence of how the capital’s broken housing market is worsening the unsustainable and increasingly unmanageable pressures we face in London. 

A bad situation is now becoming disastrous. We’re seeing fast-rising private rents and reduced availability of rental properties against a backdrop of continuing cost-of-living pressures and London’s longstanding shortage of affordable housing. Homelessness is a national emergency but with London accounting for two-thirds of England’s temporary accommodation placements we are at the epicentre of this crisis. Urgent action is needed from the government to help households avoid homelessness and to reduce the number in temporary accommodation.

Abigail Davies, Director, Savills, said:

London’s private rented sector, which provides homes for over one million households, is heavily reliant on private landlords. Many have high levels of borrowing who find themselves at the sharp end of the turmoil in the mortgage market.

The triple whammy of rising costs of borrowing, greater exposure to tax, and regulatory changes means many are exiting the sector, putting downwards pressure on supply against ever-rising tenant demand. Further upwards pressure on rents seems an inevitable consequence. Without doubt, this will compound the problems faced by lower-income households and points to the need for policy that favours the delivery of affordable homes across the capital.

Susie Dye, Grant Manager at Trust for London, said:

It’s unacceptable that in a global city like London, 166,000 people are homeless and relying on over-crowded, expensive ‘temporary’ accommodation. This radically imperfect system was a house of cards which relied on landlords of all stripes to prop it up. And now it’s collapsing.

This report shows why. The government has pursued piecemeal policies on benefits, tax, and inflating property demand as well as sporadic attention to property standards and renters’ rights. And now landlords at the lower end of the market are going elsewhere.  Those in power in Westminster urgently need to help low-income renters and ensure that in both the short-term and long-term, London has homes people can afford.

Sue Edmonds, Chief Executive of Capital Letters, said:

This research makes stark reading, and it is further evidence that our homelessness system is breaking down. This is the worst it has been for 30 years.

The main issue is supply – there simply aren’t enough homes, and the contraction of the private rented sector, alongside escalating rents, is a severe blow to those who rely on it. There are 301,000 people on waiting lists for social housing in London alone, at a time when new developments have also slowed down.

"What we need now is a joined up, holistic approach, encompassing government policy, local government action, and third-sector support to avoid continued unintended consequences with the resultant impact on the well-being and life opportunities of those affected. This is turning into more than an emergency, this is a crisis of generational proportions, and it requires immediate action.

A copy of the report can be viewed here.

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