Covid-19 has had a far-reaching impact on many aspects of life, and the private rental sector (PRS) is no exception. In the past year, M A S O N S has seen the gap between rent charged and current market value widen significantly in Hertfordshire, due to rising rents.
For landlords, this is potentially good news. However, in our experience a rapidly widening rental gap can bring challenges, as it requires a renegotiation of tenancy contracts.
For example, a self-managed landlord of ours with a three bedroom house on Waysbrook in Letchworth was achieving a rent of £1195 per month yet our market valuation was £1550 per month. Another example of the difference between current and achievable rents includes a two bed terrace on Nightingale Road in Hitchin which was renting at £730 per month, yet our market valuation of this property was £1050 per month. See the gap? Justifying and implementing such a huge ‘overnight’ rent leap is tough, and in some cases impossible.
That’s why we’re encouraging landlords to identify and address growing rent gaps sooner, rather than later. In North Herts, Covid-19 has super-charged demand for rental property, as tenants have abandoned city living, to seek larger, more rural properties, with gardens and a space (or two) for home working.
This surge in demand hit a UK rental market already struggling to meet demand. For years, rising house prices have expanded ‘Generation Rent’. Add to this tax laws and regulations designed to deter buy-to-let investors, and tenants choosing to ‘stay put’ for longer and voila… we have a perfect rental shortage storm.
Demand in North Herts is outstripping supply, so it follows that rental values are rising exponentially. And we are not alone. Average UK rental values for new tenancies rose to £1,053 per month in August 2021, that’s up 6.9% on 2020 levels.
With no indication of a drop in demand, we advise keeping a close eye on local market value, so that any ‘rental gap’ can be kept to a minimum. If you check your rent levels and find a significant gap, it’s crucial that this is well managed.
Ethical practice and transparency are core values at M A S O N S, and in terms of managing rent increases, we work closely with all parties to reach the right agreement. Individual situations must be taken into consideration, and we are mindful that right now, tenants have been financially impacted by the pandemic, both positively and negatively.
Having this insight and deploying sensitive communication is vital, especially when it comes to managing any proposed changes to the tenancy agreement. In some cases, compromises are worth it, if it sustains a good landlord/tenant relationship. For example, we might recommend extending the notice period for rent increases, to give tenants additional time to adjust.
So, if you’re a Hertfordshire landlord and your rents are due a review, please do drop us a line. We’ll be very happy to offer a free valuation of your property at current market levels. If we do identify a rent gap, we can also recommend actions on how to address it successfully.