What's the problem?

"I lived on a terraced cul-de-sac in Elephant and Castle, and it was around 60, 70 properties, all of which were owned by less than 10 people," Natalie Parkinson-Mearns tells CGTN. 

"My landlord owned 16, 17 [of those] properties, and the landlords would discuss and agree how much they were charging and how much they would increase it each year. My property's rent went up by $750 in one year."

Parkinson-Mearns, a medical student, was renting a flat share in southeast London for two years.

"The quality of the house hadn't improved and it hadn't been renovated in years," she says. "There were things falling off the walls, the carpet was coming up, and the windows were single-glazed. It was freezing cold but even with the help from the government with the bills, we couldn't afford it."

And so she was confronted with the challenge of finding a new rental property. A search which would take a week or two in previous years ended up taking three months, forcing her to take up a part-time job in hospitality which required her to work night shifts and left her physically exhausted and mentally drained.

It was after 45 viewings across London, involving hours-long train journeys, and putting the deposit down on 10 properties that the student was able to secure a rental property for herself and her flatmates – paying more than $1,500 per room. And despite the hefty cost, they have had to make a lot of compromises, such as "no door on one of the bathrooms."

"I don't have a living room right now and I'm going to study and write my medical dissertation on the landing because there's no room for a study, which is not exactly preferable. I'll probably spend most of my time in the library," laments Parkinson-Mearns, whose experience resonates with many Londoners renting in the capital.

In June 2023, City Hall – the headquarters of the Greater London Authority, which comprises the Mayor of London and the London Assembly – revealed alarming figures regarding rent payment difficulties for Londoners. 

According to the analysis, approximately 24 percent of private renters in London – around 650,000 people – are finding it difficult to meet their rent payments. About six percent, approximately 160,000, have fallen behind on their rent in the past six months.

This should come as no surprise given that the average annual cost of rent in London is $34,000, significantly higher than that in the rest of the country. 

On top of that, the average rental prices in London have increased by 14.3 percent compared to last year's rents alone.

The increasing gap between rents and wages and benefits is making it challenging for people to afford suitable housing, forcing them to make difficult choices. For some, it can even lead to eviction and ultimately homelessness.

"There's no doubt that rent costs in London are huge. The proportion of income that particularly low-income people spend on rent could be anything up to 63 percent," Shaun Bailey, Chair of the London Assembly's Housing Committee, tells CGTN. 

"The figures show 200,000 people in London now regularly struggle with their rent. So something needs to be done because the pressure for Londoners to keep a roof over their heads is extreme," warned the chair. 

It is a stark reality, clear for all to see. 

Thomas Neumark, CEO of the 999 Club, a small charity providing advice, advocacy and shelter for homeless people in southeast London, acknowledges the pressures that some people have been enduring due to rising rents.

He says when rents rise without a corresponding increase in benefits or wages, individuals who rely on these sources of income face difficulties in meeting their housing costs. And those without access to additional financial resources or support networks are particularly vulnerable in these circumstances.

"That means they can't weather that storm," warns Neumark. "We're seeing more and more people coming to us from a whole range of backgrounds. There has been a dramatic increase in demand for our services."

What's led to this problem?

The shortage of housing supply in London is considered a fundamental issue contributing to rising rents. Limited land availability, slow construction, and a historical lack of homes being delivered have resulted in a significant demand-supply gap. 

The imbalance between the number of people seeking housing and the available properties has been driving up rental prices, which have been further fueled by high interest rates on mortgages – the Bank of England announced a 0.5 percent increase in its base rate from 4.5 percent to 5 percent in June 2023.

However, Bailey argues "the rising rents in London is a historical thing around supply. The supply of homes in London has been very slow, both private and also public. And of course, the cost of living crisis has really made that a big problem for many Londoners.

"Now interest rate hikes, particularly in the buy-to-let arena, are beginning to really bite and push rents up more and Londoners are feeling that. But the supply issue is the fundamental underlying issue."

Parkison-Mearns says "there's no ceiling in London – there will always be someone who has more money to spend, and it will keep on going up exponentially."

Charlotte Russell, who has been steering the letting teams across London for JLL estate agents for 13 years, says another contributing factor is the lack of homes being delivered. She highlights that the number of homes started on site in the first quarter of 2023 was 46 percent below average compared to those started in the first quarter over the past 10 years. 

"This means that there's not enough housing being delivered to fill the gaps of the demand," says Russell. "London is quite a transient market, so a lot of people come in and out all the time. It does affect different areas in different ways."

And it is because of lack of supply that many people are forced to live in shared rentals in the city. It may help save costs but it doesn't necessarily suit everyone.

"The thing I'd say about shared housing for a number of people we're working with is it means sharing with strangers – sharing the kitchen and the bathroom," says Neumark. "And this might be with other people who have complex needs – or you are someone yourself who's been through a traumatic experience. So with no landlord presence on site, it's a scary thing for a number of people to even entertain."

Landlord difficulties

As difficult as it is for tenants, landlords are also having to navigate their own set of challenges – such as increasing interest rates, service charges and compliance expenses – which can all put pressure on landlords' finances, making it more difficult for them to offer affordable rental prices or even stay in the market. 

"The vast majority of landlords in London have one or two properties, often something they've inherited or bought to make a personal pension," says Bailey. "So they're not in a position to take lots of financial shocks. And if that happens, it devastates their entire plan so they do everything in their power to avoid that." 

The most common way for a landlord to avoid such a situation is to exit the rental market – which then lowers the availability of properties. 

Adam Lawrence owns an impressive portfolio of properties. He has been involved in over 500 UK property deals since he joined the sector in 2011, using significant joint venture funding. He has held onto around 90 percent of those properties, preferring to hold rather than sell.

"I'd always known the very low interest rates couldn't last forever, although they kept seeming to get lower and lower before they started really shooting up beyond viable amounts," Lawrence tells CGTN. 

The higher interest rates have had an impact on Lawrence's properties.

"We've gone from paying below three percent on many properties to now between 6.75 and 7 percent, on properties that we weren't able to refix on," he says.

When asked if he has passed on this cost to his tenants, he said he had always fairly gently moved rents upwards every year.

"What's changed is from nudging rents at maybe two percent a year, some of the rents have had to be adjusted upwards or the properties have had to be sold because they simply don't stack up any more, even for someone at the scale we're operating," he says.

Lawrence considers himself fortunate as he was "a little bit early to the party seeing how the rates were moving last year." So he voluntarily sold 60 or 70 properties even though he "never got into the game to sell property."

His experience highlights how the perception differs from the reality of landlords' financial situations, particularly in relation to selling properties. 

"Although people think that landlords are making money hand over fist, even with a high yield model and even with a focus on cash flow, the margins were already very thin before we went into the pandemic," says Lawrence.

Bekah Hesse-Clark, spokesperson for the London Renters Union, disagrees and sees "landlord profiteering" behind the current crisis.

"After the mass privatization of our public housing, landlords have hiked prices well above what is affordable for years," she says. "Now renters are at breaking point, with many struggling to afford food, bills, or face being driven out of their homes and communities." 

Hesse-Clark says it is unfair that under current government plans, a landlord will have the power to increase rents by up to 40 per cent and evict those who cannot pay, and is urging the government to protect renters from extortionate rent rises.

Lack of supply is a key issue but lack of affordable housing makes it so much worse for those seeking to rent.

Neumark's charity recently helped search for rental properties for a gentleman, on the UK's largest property marketplace Rightmove. They could not find a single property in the borough of Lewisham for the rent allowance he was entitled to receive from the government – between $190 and $253 a week. 

So people have to find other sources of income, which is not always possible. 

"We have people who end up putting themselves in very risky situations – single women sleeping on the floor of strangers' properties because they're faced with an almost impossible choice there," says Neumark.

What's the worst that can happen?

Lawrence says it is difficult to bridge the gap between market rent and the current rent because "those increases are 10 or even 15 percent sometimes and we've never wanted to put the rent at more than seven percent."

Compounded with the cost-of-living crisis, housing insecurity and the need for housing assistance has been affecting people from various backgrounds and circumstances, says Neumark.

His charity has seen a range of people come through its doors, from British citizens to non-citizens, and individuals to single parents with very young families, as well as those with some quite complex needs. 

"There are people who are experiencing mental health problems, or struggling with drug and alcohol use. There are some people who are in work and others who are out of work, it's the whole spectrum of people who are coming in and what's clear is everyone's really facing the squeeze," explains the charity worker.

But how do landlords deal with those who cannot keep up with their rent payments?

Lawrence says his company follows a fairly robust process with arrears because it can't afford non-payments. 

"Also morally, I don't feel that the 98 plus percent of tenants who are paying on time should be subsidizing the two percent who fall behind on rent payments," he says. "Every single case is different and you need to act with empathy, but you also need to act with clarity."

What's the solution?

One proposed solution is to focus on increasing the supply of affordable housing. This can be achieved through measures such as constructing more homes, encouraging redevelopment or repurposing of existing properties, and facilitating partnerships between government, housing associations, and the private sector. 

However, plugging the supply gap remains key to slowing down the rise in rents but it requires long-term planning and investment.

Sadiq Khan, the Mayor of London, has been advocating for rent controls. 

"With astronomical rents, bills, and the cost of household essentials rising, many London renters are only just about managing – and the situation is getting worse," he says. "More and more people are now at risk of being evicted. 

"That's why it has never been more urgent for the government to implement an immediate two-year rent freeze in the capital and give me the power to introduce a system of rent controls that works for London." 

But Bailey believes that rental caps are an "utter disaster." He argues they have never worked and can lead to more regular rent rises "because currently in London, landlords have resisted raising the rents too quickly. 

"When you put on a cap, what happens is two things - landlords get nervous and think I don't know what's going to happen in the future, so I'll raise the rent now to the maximum level I can to mitigate any trouble in the future. And then that becomes a trend and all rents start to rise," warns Bailey.

"And the second thing is, it just devastates supply because when you expose landlords to financial shocks that they can't mitigate, they'd just take the property out of the market."

Committee chair Bailey also pointed out that in certain Scandinavian countries, the implementation of rent controls led to an increase in waiting times for affordable rental housing, extending the wait from five years to nine years.

Another solution that the city's mayor is keen on is to bring vacant properties into use – he argues that some flats and houses that have been left unoccupied by their owners can be used to house people especially given there is a supply issue in the capital.

Bailey agrees on this point, saying it is important that "we do everything we can to bring empty properties back into circulation."

He says London Assembly's Housing Committee has conducted a number of studies to assess how best to add more affordable housing to the market.

Granting local councils in London the authority to purchase houses, specifically for the purpose of creating council houses, could help expedite the delivery of affordable housing. Councils could potentially acquire properties from individuals who are downsizing or no longer occupy their homes, but this solution would only work for council housing, and not the private rental sector.

"The thing we need to do in London to reduce rents is to make sure that people have decent incomes. We need to bring everything we can back into circulation," suggests Bailey.

Lawrence, on the other hand, says one short-term solution would be to find properties that no longer have a mortgage on them so in theory, the rent should not be affected by the increase in interest rates.

"You can go on the land registry and find properties where landlords haven't got mortgages on them, to guarantee yourself a bit of an edge," advises Lawrence.

"In a generation of hybrid working, it might be more sensible to live that little bit further out, and try and save some money," suggests Lawrence. "There may still be the cost of season tickets but you might find it still stacks up to go a bit further out."

Parkinson-Mearns there should be measures to make it extremely difficult for landlords to increase rent each year as "it goes up by a sizable percentage. It's completely ridiculous and just greedy, in my opinion."

She acknowledges that mortgage payments have increased for some landlords and the cost-of-living crisis may also be a factor, but insists "it is not fair to the people at the very bottom of the property ladder to have to foot the bill."

In Neumark's experience running the 999 Club, lots of tenants renting in boroughs of southeast London are threatened with eviction but he believes evictions can be prevented through mediation and payment plans agreeable to all parties. He insists the best chance of success would be to adopt an approach that understands the point of view of the tenants.

He makes a case for ensuring that "our services are joined up in helping people in the right way, as well as the government learning from what's worked well and what hasn't worked well in the past."

Like others, estate agent Russell also thinks the solution is for people to build more properties and for there to be more supply, especially given that the population is growing so "we need to have housing for people."

However, since London is quite consolidated in terms of land and there is a lot of vertical living going on, she believes it is about making "the most of the space and being savvy with that to deliver more properties. I don't really think that there's a solution to this until we see more supply."

She sees no short term solution to this problem as the market is very competitive at the moment, with tenants "taking properties without viewing them because they know some properties will go before they even go to market."

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