Record immigration has driven up rents by 8% as fears mount that Michael Gove’s reforms will trigger a further drop in supply.
A new analysis shows that a huge number of people moving into the rental market from overseas was behind the record growth in rental demand across the UK last year. Imogen Pattison, of Capital Economics, said net immigration had led to new demand for an extra 205,000 rental homes.
The figures come as Mr Gove, the Housing Secretary, forges ahead with plans to scrap no-fault evictions and more tightly regulate the private rental market via the Renters Reform Bill, which critics have warned will push more landlords to quit after years of tax raids.
Home Office data released last week showed that net immigration hit a record high of 606,000 in the year to December. Based on the average household size of 2.37 people, this means net demand for housing jumped by around 256,000.
This increase is disproportionately concentrated in private rentals. Previous analysis by the Office for National Statistics shows that at least 80% of people arriving in the UK move into private rented housing for at least the first couple of years after they move.
Based on this estimate, the number of households in need of rental properties will have swelled in the year to March by 4.4%, Ms Pattison said. In turn, this would trigger a four percentage point drop in vacancy rates.
Analysis from the US shows that a 1% drop in vacancy rates corresponds roughly to a 1% increase in rents. Ms Pattison said: “This could mean that net immigration in the UK could have increased rents by up to 8%”.
This would have made up three quarters of the 12.1% year-on-year rent growth recorded across the year in December in an index compiled by the property website Zoopla.
Benjamin Trevis, of the Centre for Economics and Business Research, said that the impact of immigration on rent prices is felt primarily in cities. Nearly half of all of the UK’s foreign-born population lives in London and the South East, with 35% in London alone, according to The Migration Observatory.
Annual rent growth in London hit 17% in December, according to Zoopla. Rent growth also far exceeded the national average in other major cities including Manchester and Glasgow, where rents climbed by 15.6% and 14.1% respectively.
The Home Office migration data marked a fresh record for net migration after previous data showed an influx of 504,000 people in the year to June 2022.
The UK has become increasingly reliant on high levels of migration to fill gaps in the workforce, particularly within the health service. The number of people moving to the UK on permanent working visas increased by nearly 100,000 in the year to March 2023, a jump of 97%. This was roughly four times the pre-pandemic and pre-Brexit norm.
A 171% surge in skilled workers in health and care – an extra 64,130 compared to the previous year – has been key. These visas accounted for more than half of all “worker” visas granted in the year ending in March 2023.
Anyone who has tried to rent a property in the last few years will be well aware of the truth of these findings. Rents have not only rocketed but viewings for properties are usually oversubscribed and have even become bidding wars in some cases.
Bringing down immigration will obviously play a large part in dealing with this situation. Last year in UK it was estimated that 41,000 “asylum seekers” were living in private housing controlled by companies such as Mears, Serco and Clearspring under Home Office contracts, with the number rising every year. Unless both legal and illegal immigration are brought under control the pressure on housing is going to continue to rise from this area alone.
Gove’s reforms have already seen an increasing number of private landlords decide to exit the market with his reforms coming on top of tax hikes for landlords and rising mortgage rates which mean some landlords are facing a loss on their rental properties each year.
Private landlords are much demonised by the media and certain organisations but they are a vital part of the rental market. There certainly is case for stronger regulation of landlords, with a certain section having dubious rental practices and not maintaining properties to a decent standard. But this should not lead to the collective punishment of the sector. The bad landlords should face sanctions including jail sentences and the compulsory purchase of properties that are deemed to be substandard.
We maybe need to see rent controls in place in our bigger cities and in areas of higher rental demand. The banning of second homes and holiday rental properties, an area that has seen massive growth in the last few years, in areas where locals are being priced out is essential. Many cities such as London and Edinburgh are seeing massive housing pressure due to whole swathes of the property market being used for short term rentals such as Airbnb, and this needs to be addressed, as has been happening in some European cities.
While there has been some movement on this in various areas, the enforcement is hindered by a lack of staff and money to check on this and the general private rented sector.
Many properties are unaffordable due to housing benefit being paid in certain areas not reflecting the true rental cost. This must change, and the paying of rent to landlords needs to be automatic to avoid rent arrears being built up and causing evictions. People need to be safe from unfair evictions but, conversely, landlords need to be able to easily remove anti-social tenants to protect not just their own properties but the people who are living beside such people. Gove’s reforms, and reforms by the Scottish Government, have made this much harder.
Ultimately there needs to be a massive program of building affordable rental property in this nation, rental property that will only be available to the indigenous population and controlled by social landlords, taking many out of the private sector and into the more secure social housing sector.
To ease pressure on the rental sector, the building of truly affordable housing needs to be expanded. Such housing must have a price set at what is affordable to the true average wage in the area and which, when resold, has an increase in value that is controlled and linked again to local conditions so as not to price local people out.
But unless we get control of ever-rising immigration these actions are unlikely to alone be able to stop rocketing rental prices.
