Renters don’t have it easy. Housemates can be unpredictable, rules can be strict, but worst of all – it’s expensive. 

Most tenants know this instinctively, but the numbers are there to back it up. The government’s Index of Private Housing Rental Prices contains data that compares owner-occupiers’ to renters’ housing costs. In the most recent measure, it found that on average in the UK, a tenant would pay around 32 per cent more to rent a property than an owner-occupier would to live in it. 

Similarly, Zoopla recorded that a renter would need an income 17 per cent higher to rent a property compared to taking out a mortgage on the same unit. In areas like the North East, mortgage holders would only need half the income of a renter to buy a property versus rent it out. While we may see some correction with higher mortgage rates, renters still pay a far higher percentage of their income on housing. 

Not only does this put renters in a tough situation, but it’s actually getting worse. Rents are increasing at a faster rate than house prices, which themselves have enjoyed a remarkable period of growth since the pandemic. Rents in London increased more than 15 per cent between March 2021 and 2022, according to Zoopla’s data. 

Back in September, Zoopla’s data also anticipated that if mortgage rates were to rise to five percent, buying power could be reduced by as much as 28 per cent. With mortgage rates now reaching 14-year highs with five-year fixed-rate products at six percent, the rental market is at risk of saturation and rent prices could be hiked up even further. 

Surprisingly, this bleak situation that faces renters doesn’t seem to have caught the attention of the public or the government in the same way as energy bills or inflation. This is partly because private sector renters are still in a minority overall, and partly because there’s an ingrained cultural attachment to owning a home. Many see renting as a temporary stepping stone to eventually buying a house. 

But renting can be an extremely fulfilling experience, and is often a sensible decision in the circumstances. The issue is the cost. 

The growth of the Build To Rent model in the UK is testament to the fact that renting can provide access to amenity-rich, well-located housing that would otherwise be out of reach. And given enough new supply, rents will come down. But this is a long-term solution, and also relies on developers being able to navigate a decidedly hostile planning system. 

With Michael Gove now appointed as housing secretary in Rishi Sunak’s new cabinet, there may well be a renewed hope for renters. Gove has urged his party that home ownership can only be achieved through cheaper social homes for rent, so tenants can “build up capital, if the rents they are paying are fair”, arguing that “there is a direct relationship between extending the number of homes for social rent that we have and ensuring that you have more home ownership in the future”. 

Gove has previously worked on the Renters’ Reform Bill that aims to give renters long-term security in their home and improving housing standards across private rental homes. His appointment will hopefully give renters what they need – help in the here and now. 

The legislation shows that he understands the underlying structure of renting needs to change. 

One of the more punishing aspects of being a renter – paying five weeks’ rent as a deposit – makes it extremely difficult to move, given that typically one deposit isn’t released before another one needs to be paid. It’s a distinctly old fashioned solution that’s no longer necessary given the development of payment technology in recent years. 

There are two approaches to moving past this antiquated system. The law is a blunt instrument, but a reinvigorated DLUHC could mandate that landlords and agents at least offer a range of deposit alternatives. Less drastically, raising awareness among consumers of the options available to them would go a long way to encouraging better financial planning, and would also put pressure on those in the property industry should more consumers demand an alternative to a five-week deposit. 

Solving the rental conundrum will likely require a mix of regulatory and commercial approaches. But the first step is clear – it’s time we acknowledged that the traditional model just isn’t working. Let’s hope that Gove can pave the way for further reforms. 

* Gary Wright is co-Chief Executive Officer of flatfair *