Startling new research conducted jointly by the London School of Economics and Savills has uncovered a 41% decline in the number of London properties available for private rent since the onset of the Covid-19 pandemic. Considered the most extensive study of London’s private rental market to date, the analysis was commissioned by London Councils, an umbrella group of local authorities deeply concerned about the housing crisis.
The research paints a grim picture of the situation, highlighting the dire consequences of the decreasing rental stock. London Councils estimates that approximately 166,000 Londoners are currently homeless, forced to reside in temporary accommodations provided by their local boroughs. Disturbingly, if the current trends persist, London will witness its highest-ever number of homeless households in temporary accommodation by the end of this summer.
Key findings from the LSE and Savills research emphasize the severity of the situation. Rental listings across London have plummeted, with a notable decline of approximately 36% for one, two, and three-bedroom properties in both inner and outer London between January and March 2023, compared to the January-March average of 2017-19. The listings for four-bedroom properties experienced the most drastic drop, nearly halving during the same period, down by 46.6%.
London’s overall reduction in available private rental accommodations, spanning one to four-bedroom properties, is an alarming 41% decrease from the 2017-19 average. In comparison, the national average decline stands at 33%. Adding to the distressing scenario, asking rents in London have surged 20% above their pre-Covid levels in March 2020, exacerbating the affordability crisis.
The researchers also examined the impact on the 300,000 London households relying on Local Housing Allowance (LHA) to cover their housing costs. LHA is part of their housing benefit or Universal Credit payment if they have a private landlord. Unfortunately, the government’s decision to freeze LHA rates since April 2020 has led to a significant reduction in affordable properties under LHA in London. Shockingly, only 2.3% of listings on Rightmove in 2022-23 were affordable for those relying on this benefit, compared to 18.9% in 2020-21.
Consequently, London Councils is urging the government to increase LHA rates, ensuring coverage for at least 30% of local market rents, while also demanding more significant investments in the construction of affordable homes.
Darren Rodwell, a Labour councillor and spokesperson for London Councils, decried the worsening housing market crisis in the capital: “This research is the latest evidence of how the capital’s broken housing market is worsening the unsustainable and increasingly unmanageable pressures we face in London. A bad situation is now becoming disastrous. We’re seeing fast-rising private rents and reduced availability of rental properties against a backdrop of continuing cost-of-living pressures and London’s longstanding shortage of affordable housing.”
Rodwell continued, highlighting the urgency of the matter: “Homelessness is a national emergency, but with London accounting for two-thirds of England’s temporary accommodation placements, we are at the epicenter of this crisis. Urgent action is needed from the government to help households avoid homelessness and to reduce the number in temporary accommodation.”
Abigail Davies, a director at Savills, shed light on the factors aggravating the situation: “London’s private rented sector, which provides homes for over one million households, is heavily reliant on private landlords. Many have high levels of borrowing who find themselves at the sharp end of the turmoil in the mortgage market. The triple whammy of rising costs of borrowing, greater exposure to tax, and regulatory changes means many are exiting the sector, putting downwards pressure on supply against ever-rising tenant demand. Further upwards pressure on rents seems an inevitable consequence. Without doubt, this will compound the problems faced by lower-income households and points to the need for policy that favors the delivery of affordable homes across the capital.”