The cost of living crisis has begun to throttle the country in earnest. Driven largely by soaring domestic and commercial energy prices, inflation has hit 10.1%. Predictions for January 2023 have that figure soaring to 18.6%. That’s 1970s numbers, without 1970s union density, council housing, or the preceding ten years of record pay rises.
So far, British households have effectively been told to simply absorb the real-terms plummet of their pay packets. Fearing a wage-price spiral, the governor of the Bank of England (BoE), Andrew Bailey, has repeatedly warned workers against asking for pay rises. But there’s been one demographic left curiously exempt from this national round of frantic belt-tightening – landlords.
In fact, landlords are cushioning themselves further from the blow by passing on costs to tenants, in the form of everything from increased rent, to suddenly transferring the responsibility for energy bills directly to their renters. A lack of rent caps or regulation means they’re getting away with it, wholesale.
Tenants, held hostage in the private rental sector by housing prices, are not only dealing with their own, immediate economic crisis – they’re having to cover their landlords’ increased cost of living too.
Social media is awash with stories. Within my immediate circle, one friend has been hit by a rent hike of 15%; another was instructed to find an extra £300 a month, or find another place to live. Official statistics suggest the average UK rent increase over the last 12 months is only 3% but alternate data suggests these figures are inaccurate. The deposit protection service suggests UK private rents have actually risen by 8.21%, with London renters seeing a 10% hike between the second quarter of 2021 and 2022.
On the ground, I have been sent visual evidence of estate agents flyering properties in north London, encouraging them to become landlords with the boast that rental prices have blossomed on average by 22% in the last year. Regardless of exact figures, it’s clear the cost of having a place to live has never been higher, and I wanted to talk to the landlords responsible.
A crisis of denial.
Around 30 private landlords kindly volunteered their time to speak to me. As is now cliche, the majority claimed to have become landlords due to an unfortunate confluence of circumstances beyond their control. Some accounts – such as a woman who moved in with her partner, but couldn’t sell her own flat as its value had been decimated by the cladding crisis – were more plausible than others. “My now wife and I split up briefly, she moved out,” one landlord in East Anglia told me. “I went to live with my dad and rented the house we’d been living in.”
So it’s just the one property you rent out? “It is actually five.”
Around six landlords informed me they hadn’t put up rents. But of those who have, increases ranged from 3% to over 20%, with the typical figure hovering around 15%. I had wondered whether the BoE’s interest rate hikes might have been a driving force behind landlords hoisting the cost of renting, but nobody I spoke to faced the immediate prospect of the cost of their mortgage increasing. Almost every landlord was either on a fixed rate (meaning that the monthly mortgage payments wouldn’t go up for another few years) or owned their properties outright.
The most frequently-cited reason for putting up rents was the sense that was what was going on in the rest of the market. One landlord, who owns a property in Bristol, bought with help from his parents five years ago, has decided to increase his rents by over 16% when new tenants move in this September. “I haven’t got a great answer [why] for you” he admitted. “I rent it through an agency and they recommend the rental price and I tend to defer to them on that.”
Other landlords who got in touch cited the wider economic climate as a reason for hiking the rents. “Rent has always more than covered costs of repairs [and] insurance,” said a landlord, who rents out a flat in Hove. Insulated from rising interest rates because he owns the property outright, he’s nevertheless put rents up by 10% when there was a change of tenancy. “It provides an income in our retirement. So, an increase now, in line with current market rates helps us with our personal costs”.
I asked whether it was possible for him to absorb his own personal costs, with the knowledge that his property was going up in value anyway. “The relationship I have with the tenant is transactional,” he replied.“They probably earn more than I do. I do give away some of my income but I prefer that to be more aligned to my values.” So much for charity begins at home.
Multiple landlords cited topping up their pensions – either now, or in the future – as the reason for being in the private rental sector. It’s certainly true that the costs of elderly care, and the impact of inflation on those who are on fixed incomes, mean that retirement is a scary prospect for millions of people in the UK. But most of the nation’s tenants don’t have a single asset whose value could cushion them in their old age, let alone more than one. And as the state-pension age continues to creep up, under-45s (amongst whom, home ownership has collapsed) are feathering the nests of retirees at the expense of their own future financial security whilst having to work for longer.
Passing on precarity.
There was a generalised picture, amongst those I talked to, of landlords outsourcing their own sense of precarity on to their tenants. “I have a job that pays very well now [but it] has not always been the case” explained the aforementioned East Anglian landlord. “I have enough surplus each month to invest […]. The plan is to make enough to cover my monthly outgoings so if my work comes to an end – which it could at any time as a contractor – then we wouldn’t struggle. I have four kids, life is expensive!”
He recently put up rents on one of his five properties by just over 18%, after refurbishing the bathroom, and initially claimed that he wasn’t making any profit on a property let to a relative. After I asked whether that meant he expected to make a loss on the overall value of the property, he said the house’s worth had increased by about £155,000 since he bought it. Though he accepted that being a landlord wasn’t like having a job (“it’s a lucrative side hustle”), the framing of profit as what you make in rent on top of the mortgage repayments – as opposed to the increasing value of the asset – is revealing of the rentier mentality.
Objectively, having five homes which are all going up in value, means that you are making a profit even if nobody was paying rent when they lived in them. Though being a contractor involves a level of precarity, being a landlord doesn’t – and tenants are paying for landlords to compensate for a perception of financial insecurity that doesn’t exist in reality.
I also spoke to a Reading-based property manager, who works on a portfolio of about 60 properties, some of which have been subject to a 4% rent increase. “From the company perspective, rents falling behind has a negative impact on the actual value,” he explained. “If we sell a property, we normally try to do so with tenants in situ to prevent unnecessary eviction. If the vacant possession of the property has risen well beyond the rent, the low yield makes it unattractive to potential purchasers.”
Translation: keeping up with average rents has got nothing to do with the value of the property on the open market. But if you’re looking to sell to another landlord, and you’re not gouging as much as you could be, they’re going to think it’s a property unlikely to deliver the monthly income they think they’re owed.
So not only are homes being kept out of the hands of those who’ll both live in them and benefit from the asset appreciation, there’s an incentive to keep increasing rents in order to extract maximum value in a landlords-only market. In 2018, it emerged that buy-to-let landlords have stopped 2.2 million families from being able to own their own homes.
Though landlords must pay the same rising fuel and food costs that the rest of us do, they have an interest in failing to recognise the fundamental causes of the inflation crisis, or their own role in worsening it. Like the energy giants passing wholesale prices down the chain to maintain gargantuan profit margins, landlords who pass on their own cost of living crises are simply squeezing people’s incomes, rather than the wealth locked in their own assets. The thing is, there’s nothing left to squeeze. Figures for 2019 to 2020 showed that a third of people renting in the private sector are in poverty. Tenants are already being impoverished by the cost of keeping a roof over their heads.
The cost of living crisis is a crisis of rentierism. What we need to survive – housing, energy, food, water – is privatised by a class of owners who only extract, and do not create, value. Financial speculation on these goods drives prices up, and essential goods are priced far out of reach of the people who need them for their use, and not merely their exchange value. And whether with a glad heart or a guilty conscience, landlords have leveraged their position within a broken system to make themselves richer at the expense of those who do not, and often cannot, own their own home.