Agents are bracing for the negative impact of the cost of living crisis, according to the latest Goodlord & Vouch State of the Industry survey.
The survey of more than 600 lettings professionals found that more than half of respondents believe the cost of living crisis will have a negative impact on every group in the private rented sector (PRS).
Agents expect the cost of living crisis to hit tenants the hardest with 35% expecting it to have a “major and negative” impact on tenants – almost double the number who thought it would have a “major and negative” impact on landlords (20%) and agents (18%).
While fewer agents are reporting increases in rent arrears than last year, almost a quarter (24%) said they’ve seen increases in arrears across their portfolios.
Of those agents who said that they had seen arrears increase, almost half said that arrears had increased by more than 20%.
More agents could see an increase in arrears in the coming year as the result of the growing cost of living crisis.
Commenting on the findings, Hamilton Fraser chief commercial officer Paul Shamplina says: “This cost of living crisis is very real, with landlords increasing rents on a scale that I have never seen before and, along with all the other utility bills rising, it’s clear that wage growth will not keep up.”
“In the 22 years I have been running Landlord Action, we have never been busier in dealing with rent arrears cases and landlords looking to sell their properties. The next six to 12 months will be a very testing time for tenants.”
Renters reform bill proposals
The survey also found that abolishing section 21 remains the most contentious proposal, with 28.30% of agents expecting it to have a “major and negative impact” on the PRS.
Only 22% of agents thought it wouldn’t have any impact, while 53% of landlords expect it to have a “major and negative impact”.
A third (33%) of agents said they were “very concerned” about the impact of the Renters’ Reform Bill on the PRS.
A further 48% said they were “somewhat concerned”. More than half (56%) of landlords said they were “very concerned” about the impact of the bill on the PRS.
The survey also reveals that letting agents are more likely to offer a rent protection service when section 21 is abolished.
Almost 40% of agents who don’t currently offer a rent protection service said that the forthcoming abolition of section 21 would increase the likelihood of them offering one.
While 67% of landlords said they didn’t currently use a rent protection service, just under a third of those (31%) said the abolition of section 21 would increase their likelihood of using one.
Just over 40% of agents expect the introduction of a single system of periodic tenancies to have a negative impact on the PRS with 19% expecting it to have a major and negative impact.
Almost half of the agents expect the Decent Homes Standard to have a positive impact on the PRS, while they felt other proposals would have a net positive impact on the sector including the introduction of new grounds under section 8 (44%), the introduction of a new private renters’ ombudsman (49%) and a property portal (44%).
Property Redress Scheme head of redress Sean Hooker comments: “Whilst the white paper was meant to be the blueprint for a transformation that will provide a safer, secure, and sustainable rental market, the details and unforeseen consequences are causing anxiety and uncertainty amongst all parts of the market. The sooner a final decision is made, the better.”
Stock shortages
Elsewhere, the survey found that 65% of agents had struggled with a lack of stock in the past year.
More than a quarter of agents had seen more than 10% of their landlords leave the sector in the past year with 67% expecting more of their landlords to leave in the coming year – of those, 28% said they expected more than 10% of their portfolio to leave.
Almost half of the agents said legislation and regulation changes would be the reason landlords leave the PRS.
Other reasons included the Renters’ Reform Bill (37%) while others said the scrapping of section 21 (29%).
The survey also showed that demand from tenants isn’t likely to slow down any time soon.
Almost two-fifths of tenants said they were unlikely to purchase a property of their own in the next five years.
Martyn and Gerrard lettings director Greg Tsuman says: “Unsurprisingly, the raft of tax and legislative changes have affected landlord confidence in the rental sector. Landlords leaving the market is the single biggest threat to tenants, who are already struggling to secure a home.”
“Sections 24 and 128 of the Finance Act 2016 must be reversed immediately followed by a full impact assessment before any further legislation is put before parliament. Failing this, homelessness will increase and rents will spike even higher.”
Attitudes to technology
Looking at the sector’s attitudes towards technology, almost half of agents (42%) say they’re either “very optimistic” or “somewhat optimistic” about the future of the lettings industry, despite recent challenges.
However, that figure has been in decline since 2020.
Three quarters of agents (74%) agreed to some extent that “the lettings industry has been left behind other sectors in its use of technology”.
Agents felt all aspects of the tenancy process would benefit from new technology and/or automation systems.
Only 5% said that agents weren’t open to new technologies. At the same time, 94% of agents agreed that “there would always be a role for humans in the lettings business”.
The Property Academy founder Peter Knight comments: “The recent announcement of rent freezes in Scotland sent shockwaves across the whole of the PRS. That said, landlords and agents have both shown considerable resilience to whatever has come their way, whether that be legislative or tax changes – I’m sure they will continue to find solutions for all parties.”
Commenting on the findings of the full report, Goodlord chief operating officer Tom Mundy says: “This report comes at a seismic time for the industry. After two and half years of almost unimaginable upheaval, the private rental sector is now facing another series of intense challenges. A raft of new legislation and a major economic crisis mean that the year ahead will be choppy.”
“It’s clear from the data that tenants are concerned about their finances and landlords are also feeling uneasy. Despite this, the majority of agents remain optimistic about the future and confident in their ability to weather the forthcoming challenges. As ever, I’m full of admiration for our industry stakeholders and their ability to adapt and thrive even in unsettled times.”
