Data continues to show that rents have been falling fast in major cities across the UK as a result of coronavirus, which has caused demand for properties from overseas workers, students, tourists and corporate travellers to plummet.

Rents in major cities, including Manchester, Birmingham, Edinburgh, Leeds and Reading, have tumbled in recent months and are unlikely to rebound quickly. 

It still remains unclear how fundamental and long-lasting the changes to the working and living habits of city dwellers will turn out to be. What we’re seeing might just be a temporary shift in the rental market, or the start of the UK’s rental map being redrawn permanently.

Falls in rent are most pronounced in London, the city in the UK most exposed to the demand shock unleashed by the pandemic. This reflects London’s status as the UK’s capital city, it’s reliance on tourism and the fact that a disproportionate percentage of jobs are in professional services, where it is easier to ‘digitally commute’.

Demand levels in the rental market in London have changed more than anywhere else in the UK and consequently London has an oversupply of property. Two of the principal causes are 1) a reported 700,000 overseas workers returning to their country of origin combined with many UK workers returning “home” and 2) apartments that are usually let on platforms such as Airbnb have been converted into long-term lets.

So how does lower demand and the impact on market rents affect how a housing charity like Dolphin Living sets intermediate rent levels when we have an obligation to our tenants to set rents that are discounted from the market level and link our annual rent increase to inflation? 

If we were to base our rents on what is calculated by search engines like Right Move or Zoopla then it would make our target of renting at 80% or less of the market level difficult because portals like these reflect the constant fluctuations of monthly supply and demand data in a geographical area. Instead, we use the GLA average market rents for each borough and postcode. This market comparison data is more transparent and fairer. 

Furthermore, rent increases must be in line with the respective planning agreements for our properties, which are typically aligned to increases in the Consumer, Retail and Wholesale Price indices, and include affordability constraints linked to household incomes. And it important to note here that in prior years where market rents have increased above inflation, our increases have remained linked to inflation.

This means that rents only go up where we know there are generally limited affordability concerns. And if any individual residents have concerns with affordability or are facing financial hardship, then we can review and amend our approach to tailor for their needs.

The financial impact of the pandemic has not been evenly shared. So increasing rents across the portfolio actually allows us to support individual households who have suffered hardship through loss of employment or reduction in earnings. 

Over the last year, Dolphin Living has continued all repairs and maintenance across its entire portfolio. We continue to heavily invest in our homes, including a major refurbishment project costing over £1.3million. Our suppliers have not altered their pricing structure to reflect the current market so our ongoing costs continue to increase rather decrease. Therefore, we don’t have any substantial savings to pass onto our tenants through rent reductions. 

Overall, though, despite the pandemic and short-term changes in rent levels in the market, our rents continue to be 80% or less than the typical market equivalent across our portfolio of intermediate rental housing; and no increases have been applied where our rents are close to 80% of the local market level.