Incrementing expenses faced by landlords due to prolonged vacancies in the United Kingdom
The Renters' Rights Bill, a proposed legislation aimed at enhancing tenant protections, has raised concerns among landlords due to its potential impact on void periods and rental income. Over the past year, rental revenue losses for landlords in England due to void periods have risen, influenced by factors such as market saturation, economic conditions, and policy trends.
**Causes of Increased Void-Related Revenue Losses**
The expansion of 'Build to Rent' developments in cities like Leeds has led to increased competition among landlords, resulting in higher vacancy rates. Tenants, particularly those on lower incomes, are less able to move due to rising living costs, paradoxically increasing demand for affordable rentals but also leading to longer void periods for higher-priced properties.
Regional demand varies, with some areas, like Manchester, Liverpool, and Nottingham, experiencing strong rental demand, while others, especially those previously experiencing rapid rent growth but now seeing a slowdown, may face longer void periods as the market adjusts. The return of rental inflation rates to pre-pandemic levels and improved access to mortgage finance have made it easier for some tenants to leave the rental market, increasing the risk of void periods for certain property types.
**Regions with the Highest Costs Due to Void Periods**
Cities like Leeds, Sheffield, and Bradford have seen weakened rental growth or even rent declines, making them more prone to void periods, especially for landlords with properties targeting students or young professionals who may be more transient. Parts of London, particularly North West London and West Central London, have experienced slight rent decreases, which can correlate with longer void periods as landlords adjust prices or properties remain vacant longer between tenancies.
Contrastingly, cities like Liverpool and Manchester continue to see solid rental yields and demand, with fewer void periods, especially in areas benefiting from short-term lets and music tourism, which help keep occupancy high and vacancy low.
**Summary Table: Regions and Trends**
| Region/City | Rent Trend (YoY) | Void Period Risk | Notes | |----------------------------|------------------|------------------|----------------------------------------------------| | Leeds | -1.5% | High | Increased supply, falling rents, university market | | Sheffield | +1.9% | Moderate | Slower growth, still some student demand | | Bradford | +1.4% | Moderate | Slower growth, but less pronounced than Leeds | | North West London | -0.2% | Moderate-High | Slight rent decrease, competitive market | | West Central London | -0.6% | Moderate-High | Slight rent decrease, high turnover | | Liverpool | N/A (Yields >8.5%)| Low | High demand, strong yields, short-term lets help | | Manchester | N/A (Yields ~8%) | Low | Strong demand, student and young professional base |
**Key Takeaways**
Void periods and associated revenue losses are more pronounced in regions with falling rents, high supply, or market saturation, such as parts of London and some university cities like Leeds. Conversely, cities with robust rental demand—particularly Liverpool and Manchester—see fewer void periods, thanks to strong yields and the popularity of short-term lets. The root causes include market saturation, affordability pressures, and shifts in tenant mobility, with policy and new housing developments playing significant roles.
Experts have analysed the length of void periods across the rental market in England, the lost rental income as a result of these void periods, and how this has changed over the past year. The level of rental revenues lost by landlords due to void periods has increased by 19% across England over the past year, climbing as high as 65% in some regions. The length of the average void period has risen by 10 days in the Northwest, now averaging 30 days, and the cost incurred by landlords across England as a result of the average void period now stands at £1,085.
The Renters' Rights Bill could potentially exacerbate the issue of longer and more frequent void periods for landlords, as it may allow tenants to leave with just two months' notice, putting landlords back at square one in terms of finding a tenant. The switch to periodic tenancies over fixed-term contracts could leave landlords facing difficulty in finding tenants, leading to increased void periods.
The Renters' Rights Bill is on the horizon and could have significant implications for the private rental sector. Landlords across London have seen the second largest annual increase in the level of rental income lost due to void periods at 36%, and the capital is also home to the highest cost of a void period of all regions of England, at an average of £1,611. The average monthly rent has increased, now sitting 8.9% higher than this time last year at £1,375, and the Renters' Rights Bill could potentially reduce the profit margins of buy-to-let investors.
Sources: [1] LSL Property Services, Letting Index, February 2023 [2] ARLA Propertymark, Private Rented Sector Report, February 2023 [3] Zoopla, Rental Market Report, February 2023 [4] Rightmove, Rental Trends Tracker, February 2023
- The increase in competition among landlords resulting from the proliferation of 'Build to Rent' developments, the shift in tenant mobility due to economic factors, and the return of rental inflation to pre-pandemic levels have all contributed to the rise in void-related revenue losses in the business of real-estate investing.
- Some regions, like Leeds and parts of London, have seen increased vulnerability to void periods due to factors such as market saturation, economic conditions, and policy trends, making it essential for landlords in these areas to carefully consider their investment strategies in finance and real-estate.
