London’s private rental market has seen a drastic decline of 41% in available properties since the outbreak of the Covid-19 pandemic. This alarming situation is exacerbating homelessness across the capital, warns a recent study jointly conducted by the London School of Economics (LSE) and Savills. The research, commissioned by the cross-party group London Councils, provides the most in-depth study to date on the London private rental market and its ties to homelessness.
As more landlords exit the buy-to-let market, the housing crisis in London escalates. This shrinkage, along with the freeze on the Local Housing Allowance (LHA) and skyrocketing rents, aggravates the struggles of low-income households to find affordable housing and increases the burden on London boroughs in their effort to prevent homelessness.
The co-funders of the study, including Trust for London, Capital Letters, and the London Housing Directors’ Group, join London Councils in affirming that the study underscores the urgent need for government intervention to address the growing homelessness due to the failing housing market.
An estimated 166,000 homeless Londoners are living in temporary accommodation arranged by their local boroughs, a number equivalent to the entire population of certain London boroughs or cities the size of Blackburn or Oxford. London Councils has deemed the situation “unmanageable” as London is projected to hit a record number of homeless households in temporary accommodation by the end of the summer.
Among the critical findings from the LSE and Savills research are the following:
- Rental listings across London have plummeted, with a decrease of approximately 36% for one, two, and three-bedroom properties in both inner and outer London post-pandemic.
- Listings for four-bedroom properties have seen the steepest drop, with nearly half (46.6%) fewer listings.
- The overall reduction across all property types is 41% down from the average of 2017-19. This decline surpasses the national decrease of 33%.
- The ‘asking rents’ listed by London landlords are now 20% higher than pre-pandemic levels.
- The contraction of the buy-to-let market and the rising number of rental properties advertised for sale are further aggravating the challenges for low-income households and local boroughs seeking temporary housing solutions.
The researchers also highlighted the impact of the LHA freeze since April 2020. In the face of soaring rents, this freeze has significantly reduced the number of affordable properties for the 300,000 London households reliant on the LHA. Just 2.3% of London listings on Rightmove in 2022-23 were affordable for recipients of this benefit, down from 18.9% in 2020-21.
The Renters Reform Bill currently making its way through Parliament promises some positive changes for the private rented sector. However, London Councils and its partners urge the government to take further measures to support low-income renters and combat homelessness, such as increasing the LHA to cover at least 30% of local market rents and investing in the construction of more affordable homes.
“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,” said Cllr Darren Rodwell, London Councils’ executive member for regeneration, housing and planning. “Homelessness is a national emergency but with London accounting for two-thirds of England’s temporary accommodation placements we are at the epicentre of this crisis. Urgent action is needed from the government to help households avoid homelessness and to reduce the number in temporary accommodation.”
Susie Dye, grant manager at Trust for London, added: “The government has pursued piecemeal policies on benefits, tax, andinflating property demand as well as sporadic attention to property standards and renters’ rights. And now landlords at the lower end of the market are going elsewhere. Those in power in Westminster urgently need to help low-income renters and ensure that in both the short-term and long-term, London has homes people can afford.”
Abigail Davies, Director at Savills, warned: “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. Without doubt, this will compound the problems faced by lower-income households and points to the need for policy that favours the delivery of affordable homes across the capital.”
Sue Edmonds, chief executive of Capital Letters, stated: “This research makes stark reading, and it is further evidence that our homelessness system is breaking down. This is the worst it has been for 30 years. What we need now is a joined up, holistic approach, encompassing government policy, local government action, and third-sector support to avoid continued unintended consequences with the resultant impact on the well-being and life opportunities of those affected. This is turning into more than an emergency, this is a crisis of generational proportions, and it requires immediate action.”