People renting increases by 28%, whilst fewer homes are available for rent

More than one in five people now rent in the private sector, while the number of those who own a home has fallen, according to the latest Housing Census.

  • The number of people renting a home in the private sector in England and Wales has jumped by 28% during the past 10 years

  • A third of people own their property outright, while 29.7% have a mortgage or own a stake in a shared ownership property

  • The majority of people live in a house or bungalow, but the number living in flats has seen the biggest increase since 2011

An estimated 5 million households – more than one in five – rented their home in the private sector in 2021, up from 3.9 million in 2011, according to the government’s latest Housing Census.

Stretched affordability, caused by strong house price growth during the past decade, is likely to be behind the increase, as first-time buyers delay stepping onto the property ladder.

There has also been a fall in the number of households who own their home, with the proportion of owner-occupiers dropping to 62.5%, down from 64.3% in 2011.

The census also found that the number of households in England and Wales has increased by 1.4 million since 2011, to stand at 24.8 million in 2021.

The number of new homes being built has failed to keep pace with this rise, contributing to the increase in house prices seen during the past 10 years.

Here’s what else the census revealed:

How many people own their own home?

Across England and Wales, the percentage of households who own their own home has fallen during the past decade.

However, due to population growth, the actual number of homeowners has increased.

In 2021, around 15.5 million households lived in a property they owned, up from 15 million in 2011.

Overall, a third of people own their property outright, while 29.7% have a mortgage or own a stake in a shared ownership property.

One in five people rent their home in the private sector and 17.1% rent it through a local council or housing association – broadly unchanged from 2011.

A lucky 33,000 households, around 0.1% of the total, live in their home rent free.

This may be because they are property guardians, have a job that comes with a home, are live-in helpers or house-sitters.

Homeownership rates were highest in the South East and South West at 67.1% and 67% respectively, and lowest in London, with the capital having the highest proportion of people who rented from both the private sector at 30% and the social sector at 23.1%.

What type of homes do people live in?

Almost 78% of people lived in houses and bungalows, while almost 22% lived flats, maisonettes or apartments.

The remaining 0.4%, around 104,000 households, lived in a caravan or other temporary structure.

The number of households living in a flat or apartment has seen the biggest increase during the past 10 years, with an additional 500,000 households living in flats in 2021, compared with 2011.

There was also an increase in the proportion of people living in detached and semi-detached houses, while the number of people living in terraced properties fell.

This is likely to be because fewer terraced properties are being built compared with other properties, according to the National House Building Council.

Unsurprisingly, people in London were most likely to live in a flat at 54%, compared with 21.6% in the South East and just 11.4% in the East Midlands.

Do people have enough space?

When recording the Housing Census, the number of ‘rooms’ a property has doesn’t include kitchens, utility rooms, bathrooms, WCs, conservatories, halls or landings.

With that in mind, the study found that three-quarters of people lived in a home that had between three and five rooms, while 13.9% had six to eight rooms.

Just over 1% had nine or more rooms.

At the other end of the scale, one in 10 households are living in properties that have only one or two rooms.

In terms of bedrooms, 40.4% of homes had three bedrooms, with 27.1% having two bedrooms and one in five properties having four or more.

Around 11.4% of properties – the equivalent of 2.8 million households – had just one bedroom.

Despite more than one in 10 properties having just one bedroom, only 4.3% of households said their home was overcrowded and they had fewer bedrooms than they needed, although the proportion rose to 11.1% in London.

Meanwhile, seven out of 10 households reported having more bedrooms than they actually required.

How many homes have central heating?

Nearly all homes in England and Wales had central heating in 2021 at 98.5%, although this still left 367,000 households in properties without central heating.

The majority of homes were heated with mains gas at 73.8%, while 8.5% had electric heating.

Just 99,000 properties were heated using solely renewable energy, but a further 135,000 used at least one renewable energy source, alongside other sources, such as gas or electricity.

People living in the Isles of Scilly, off the coast of Cornwall, were most likely to be using at least some renewable energy at 6.1%.

By contrast, just 0.2% of homes in Blackpool used at least one renewable energy source.

How many cars do people have?

More than three-quarters of households owned a vehicle, with 41.3% households owning at least one car or van, while 26.2% owned two vehicles and 9.2% owned three or more.

But 23.3% of households did not own any cars or vans, down from 25.6% in 2011.

Unsurprisingly, the highest concentration of households that did not own a vehicle was in London at 42.1%, rising to 77.2% in the City of London.

At the other end of the scale, households in the South East and East were most likely to own two or more vehicles at 42.3% and 41.6% respectively.

There’s a chronic lack of rented homes available and rents are rising fast. Why is this happening and when will things improve?

  • The number of homes available for rent right now is less than half normal levels

  • The financial dynamics of investing have changed since 2016 with fewer landlords investing in buy-to-let homes and a growing number selling up

  • Many renters are choosing to stay put, rather than look for somewhere new and risk paying higher rents, which compounds the problem

  • This scarcity of options is a growing concern for renters and means rents are rising fast

  • However, the availability of homes for rent will improve slowly in 2023

Half the normal number of homes available to rent right now

The typical UK estate agent has just 8 homes available to rent at present. That’s less than half the pre-pandemic average of 16, showing how choice for renters has worsened over the last 2 years.

This is in contrast to the sales market, where supply is recovering as the market weakened in the second half of 2022.

Demand for rented homes is being driven by the strength of the labour market and is now being compounded by higher mortgage rates, which are making it harder to buy a home and keeping more people in the rental market for longer.

Low supply and rising demand pushes rents higher as people compete for homes.

The average rents for those moving home and starting a new tenancy have risen by 12% over the last year and by as much as 17% in London.

In big cities like Manchester, Birmingham, Cardiff and Edinburgh, rents have gone up 12-15% in the last 12 months.

But it’s important to note that renters who aren’t moving are facing lower increases, which are closer to 4%.

There are two reasons for this:

1: A quarter of renters are still in fixed initial periods with their rental contracts.

2: Many landlords aren’t looking to increase rents after the initial fixed period.

However, the disparity between low supply and rising demand is adding to the overall increase in the cost of living for renters, something that might not improve as rapidly as many would like in 2023 as we explain below.

Why are so few homes available to rent?

The lack of homes for rent and limited choice facing renters is down to several inter-related factors.

1. The dynamics of investing have shifted, reducing investor demand

The root cause of low availability is that the number of privately rented homes has remained static for the last 6 years, stuck at around 5.5 million homes across Great Britain.

This follows over a decade of rapid growth from 2000 as buy-to-let mortgages became more accessible and private investors bought up homes to rent out, adding to supply.

The financial dynamics of investing in residential property have shifted in recent years as a raft of new tax and regulatory changes have been introduced from 2016. These have added to the costs of being a landlord and reduced the returns from investing, which has led to lower levels of new investment into the rental sector.

At the same time, a small but growing number of private landlords have been selling their rental homes. Some have reached retirement age and are taking the opportunity to sell into a strong sales market and release capital gains.

Others are looking to rationalise their portfolios, selling homes that are costly to run or need significant investment. Or they’re simply looking to reduce the size of their mortgage debt by shrinking their portfolio.

The net result is that the number of landlords selling their homes has matched the number of landlords buying them, so the overall supply of homes for rent has remained static.

2. Renters are staying put and moving less often

Fast rental growth for new lettings means more existing renters are staying put for longer. This means fewer homes are becoming available for rent each year, adding to the scarcity problem.

The English Housing Survey shows the average length a renter stays in a property has grown to 4.4 years, up from less than 3 years a decade ago.

Older households tend to stay in their rental properties for even longer.

This creates something of a vicious cycle. The faster rents rise, the more likely renters are to stay put, compounding scarcity and adding to the pressure on rents.

3. Localised supply pressures

In tourist hotspots like big cities and seaside areas, homes for rent can shift between the short-term holiday-let market and the longer-let market.

Landlords can typically get higher rental income from renting out homes to tourists on short lets rather than long lets, although the costs are higher.

This is a further challenge for overall supply, squeezing availability for those looking for longer term lets.

When will the availability of rented homes improve?

Unfortunately, a large increase in rental supply is very unlikely in the near term, given higher borrowing costs for landlords and further regulatory changes which will add to the cost of investing.

The UK’s private rental market is going through a period of rationalisation and consolidation after more than a decade of very rapid growth up until 2016. The worst is probably over but there is further to run as landlords re-evaluate their strategies for investing.

The weakening of the sales market in the latter part of 2022 will slow the number of landlords looking to sell but those with hard-to-let or costly-to-run homes will still look to dispose of these properties at a price that is attractive to a homeowner.

New investment into the residential market continues but this is focused on homes that are more energy efficient and better suited for renting, with lower management and running costs and where there is stability of rental income.

Private landlords are shifting from a primary motivation of seeking house price growth to drive returns to a focus on the strength of rental income and taking what the market gives them when it comes to capital gains.

Build to rent is the supply bright spot, but it’s not cheap

The bright spot for the rental market is on the corporate investor front. Over the last decade long term corporate investors, including pension funds and insurance companies, have poured new capital into building new rental communities across the UK’s big cities.

An estimated 74,000 new private rented homes have been built, a further 48,000 are being built and another 115,000 are planned, according to data from the British Property Federation.

This new investment is important but these homes – built and under construction – represent less than 5% of all private rented homes. We believe this investment will continue and change the landscape of choice and quality across the rental market in the next two decades but these newer homes also command higher rents.

In the near term, private landlords remain incredibly important to the overall supply of rented homes. There is a balance to be struck between improving standards and greater regulation of the rental sector, alongside the need to support overall levels of supply for a very important and flexible housing tenure for consumers.

Only by increasing rental supply over the medium to long term can we reduce the upward pressure on rents that is adding to the cost of living pressures facing the nation’s renters.