Three reasons for rising rents

Lettings boards
Image caption The rental market has created some tough conditions for tenants

People are cutting spending on food and heating in order to finance their rent payments, according to the housing charity Shelter.

In August, the cost of renting a home rose at its fastest rate for a year, and tenants increasingly missed payments, LSL Property Services found.

So, as housing charities warn that rents are becoming unaffordable for some, how did the market end up like this?

Are the roots of the issue found in long-term housing strategy, or is it all to do with the state of the UK economy?

Here, those involved in the market explain what they consider to be the key reasons behind rising rent levels.

Not enough homes have been built

Shelter say that private rents are unaffordable in 55% of English boroughs, having already risen at one-and-a-half times the rate of incomes in the 10 years to 2007.

The "primary reason" for this, it says, is the failure to build enough homes in recent years, and in recent decades.

David Newnes, of LSL, who owns letting agents Your Move and Reeds Rains, says the supply of rental properties has not increased enough to keep pace with the rising number of tenants.

The lack of newly built properties also comes as the UK population is growing.

New house building is at a post-war low, with just 134,000 new homes built in the UK in 2010, government figures show.

That was the lowest number in any year since 1949, and just 31% of the peak number for building, which was 426,000 in 1968.

Since 1990, the building of "social" housing by housing associations has been lower than new local authority building seen in the 1960s, 1970s or the early 1980s.

Housing Minister Grant Shapps says that councils will now be rewarded for freeing up disused public land to build on.

Renting is a lifestyle choice

The Shelter research suggests that rent levels are more affordable in cities such as Manchester and Birmingham, than in some rural areas.

Media playback is unsupported on your device
Media captionMiles Shipside, Rightmove: "This problem is going to grow and grow"

But estate agents say that demand is higher, even in the cities, because people like the flexibility of renting, rather than owning a home.

"Historically, we have been a nation of home owners, but we have started to see a shift in the way people live, a shift which could well gather pace in the future," says Carolyn Mellor, of Manchester-based estate agents Homes4u.

"Now more people are making a lifestyle choice not to commit to the financial burden of a mortgage, and to benefit from the flexibility of renting in the long term rather than the short term.

"Inevitably, this means that less old stock is coming back onto the market, and the supply-demand balance is being disrupted."

Simon Ward, director of the Dorset-based estate agents Mr Green, says: "With many young people still reluctant to take on the responsibility of a mortgage, there is a temptation to talk of a Generation Rent - suffering ever increasing rent, but unwilling or unable to take out a mortgage."

A recent report for the Royal Institution of Chartered Surveyors suggested that home ownership in England has been falling since 2003 and has also fallen in the US, Australia, Austria, Finland and the Irish Republic, among others.

If current trends were projected forward, then by 2025 the percentage of home ownership could be below 60% - lower than most other European countries.

First-time buyers cannot get on the property ladder

The banking crisis had a significant impact on those trying to buy their first homes. Banks had to pull back their lending, and be more careful who they were going to give mortgages to.

As a result, many first-time buyers realised they needed to save a lot more than they expected for a deposit. In the meantime they needed somewhere to live - and that often came through the private rental sector.

"With more people seeking to rent, rents will inevitably rise. It is pure supply and demand," says Suzanne Bradshaw, of Derby-based independent mortgage broker Mortgage Arena.

"As long as mortgage criteria remain as they are at present, namely stringent, rents will remain very high."

Matt Hutchinson, director of flat and house-share website, says: "People who would normally be looking to buy their first property after renting for a few years are either unable to because they cannot secure a mortgage, or are reluctant to because of all the uncertainty surrounding interest rates and property prices so are renting for longer as a result.

"The knock-on effect is that existing rental properties are off the market longer, and with fewer new rental properties becoming available, the supply-demand balance is completely off kilter."

This has also provided an opportunity for investors, if they can afford it, says Mr Newnes, at LSL.

"With high demand and the expectation of high rental income, there are a growing number of investors turning to the buy-to-let market as an alternative investment opportunity," he says.

"In response lenders are now offering a wider range of mortgages, at more affordable prices, which is driving investors to purchase properties which would have normally been bought by home buyers."

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