If you’ve been following the news lately, you’d think that coronavirus had solved London's renting crisis. “London landlords suffer record fall in rents as coronavirus effect takes hold,” wrote the Telegraph, reporting on stats from estate agent chain Hamptons International. “London rents are falling fast – and that's good news for tenants,” proclaimed the Guardian, also using Hamptons’ data, as well as data from property website Rightmove. Other property companies have shared similar stats – last month, SpareRoom reported that rents for rooms in London had fallen, particularly in central London.
Considering the astronomical cost of renting in the capital, this can only come as good news, right? Just before the pandemic, research from the Office for National Statistics showed that rents in England had reached a record high, with London having a median rent of £1,425 a month. Thanks to limited housing stock and near non-existent legal protection for renters, London landlords have been able to increase rents with little risk to their income. Then, coronavirus came along.
As with many other industries, coronavirus has completely upended the residential lettings market. The pandemic has caused a shift in supply and demand: many tenants are now moving out of London as working from home becomes the norm, which means less demand for property. Meanwhile places rented out as holiday or Airbnbs lets are much harder to fill, and so have flooded the rental market, causing an increase in housing stock. In addition to this, the household income of renters has fallen during the pandemic, meaning many people simply can’t afford the rents they once paid, forcing them to move to cheaper accommodation, or even accrue rent arrears.
All of these factors, and many more, are likely to affect rents. But does this mean cheaper rents are on the horizon for Londoners? Well, not quite. Here's why.
THE BIGGEST RENT DECREASES ARE IN CENTRAL LONDON
It’s important to take a closer look at the data from Rightmove, SpareRoom and Hamptons International before making sweeping statements about rent costs in London.
Firstly, most of the stats that reflect a fall in rents apply to areas in central London. SpareRoom saw the biggest decrease in North Kensington and Bloomsbury – largely affluent neighbourhoods with wealthy and international tenants, as did Hampton’s International, which reported steep rent drops in Zone 1. While Rightmove data obtained by the Guardian did show that less expensive residential areas in Zone 2 had seen an 8 percent fall in rent prices, data from the property website seen by VICE News found that overall rents in London have actually increased during the pandemic. The "asking rental price" for properties in London was up 3.9 percent in March, 3 percent in April, and 0.4 percent in May compared to 2019.
SMALL DROPS IN RENT DON'T MAKE LONDON AFFORDABLE
The words “rents are falling” sound great, but London rents would need to fall by a lot before they became cheap – the average tenant in London pays 30 percent of their income on rent. This is only likely to happen through the implementation of long-term measures, such as rent control legislation and an increase in social housing.
Speaking to VICE News last month about falling London rents, Portia Msimang of Renters' Rights London explained: “In March of this year, rents reached a record high (London median £1,425) so a drop of 7 percent in some parts of town still leaves the cost of a decent home there out of reach for most. Many renters could not move now, even if they wished to, because reduced income caused rent arrears to build up during the pandemic.”
REDUCED RENTS WILL BENEFIT THOSE WHO CAN MOVE EASILY
As Msimang notes, the estate agents' data only refers to asking rents, i.e. houses and flats currently on the market to let. It does not show that landlords are reducing rents for current tenants. Moving is expensive – even with the tenancy fee ban – not to mention stressful, making it likely that only those with the money and flexibility to move house will able to take advantage of areas with falling rents.
A spokesperson for Generation Rent told VICE News: "We need rents really to fall substantially before they’re affordable, but it’s really hard for people who need to stay in the home they're in to actually benefit from those falling rents.”
ULTIMATELY, IT'S WAY TOO EARLY TO TELL
Most of the estate agents' data on rent costs covers March to June 2020, and compares year-on-year differences – for example, rents in May 2020 compared to May 2019. While these stats provide a small insight into the current renting market, they can’t yet give a bigger picture view, such as a consecutive fall in rent over a number of years.
It's also worth noting that estate agents have skin in the game here, evidenced by their boasting about a “mini-boom” in the housing market to encourage prospective home buyers, or publicising cheaper rents to make their properties look more tempting to potential tenants.
The Generation Rent spokesperson said that while the organisation expects rents to fall slightly due to the pandemic, when taking into account the nationwide fall in household income, it’s not necessarily good news for all tenants. They said: “I think the main issue, given that rents have been falling, [is] it’s all at the expense of people who have lost income."
This article originally appeared on VICE UK.