With house prices at astronomical levels, renting a property is usually the only option for young people starting out on their own. However, an emerging phenomenon is making even the rental market unassailable for an increasing number of young people: rental bidding wars.
A shortage of rental properties means that there is fierce competition for the few places available, and many landlords are taking advantage of this by inviting bids to rent their properties. Thisismoney.co.uk1 reports that some landlords are now demanding six months’ rent in advance. This is pricing young people out of the market, particularly those already facing challenging personal circumstances.
Sarah Muckart, Senior Placement Co-ordinator at youth charity Step by Step, explains: “As the need to bid for a property becomes more commonplace, the likelihood of a young person securing their own property declines. Young people who have faced challenging upbringings and experienced homelessness will be at an immediate disadvantage.”
In recent years, the government has introduced a raft of legislation to put more responsibility and onus on landlords. While this is welcome news for renters, it has led to many landlords pulling out of the buy-to-let market. Buyassociation.co.uk2 suggests that the 3% stamp duty surcharge on second properties, changes to Section 24 tax relief, and a range of new licencing rules and standards have contributed to landlords moving away from buy-to-let investments.
This exodus has been exacerbated by the recent challenges of covid, as well as booming house prices that make selling up more attractive than ever.
The Times3 explains how the rental landscape is now very different post-covid, with landlords either selling up to take advantage of historically high house prices, or focusing on short-term lets on Airbnb to escape taxes, regulations and to make money from the increased demand for staycation rentals.
This has resulted in the pool of available rental properties shrinking considerably, and a large number of people fighting for each rental opportunity as soon as it becomes available.
Traditionally, landlords have let a property on a first-come-first-served basis. As long as a potential tenant can pay the deposit and passes reference and credit checks, the place is theirs. This meant that a young person was in the same running as everyone else. However, there is nothing in law to say landlords have to adhere to this principal, and in practice they are free to use their own criteria when choosing a tenant.
This has led to landlords asking potential tenants to write an application, explaining who they are, their background, and the amount they are willing to bid, either in terms of the monthly rent or the amount they are able to pay upfront. Landlords then make their decision based on who can pay more or who looks better on paper. Applicants are often gazumped by those offering to pay up to 25% more rent (thisismoney.co.uk1).
According to Sarah Coles, Senior Personal Finance Analyst at Hargreaves Lansdown (quoted by inews.co.uk4), “renters are getting dragged into bidding wars where they’re forced to pay more than the advertised rent in order to have somewhere to live”.
Increasingly, the advertised rent is becoming a minimum bid amount, not only excluding those with less financial means, but also contributing to the 9.9% increase in rents over the last year, as reported by rightmove.co.uk5.
While having to bid on rental properties affects potential tenants from all demographics, it is young people who are most impacted. This is because they usually have less ability to pay and less experience in navigating the housing market. For a young person who has experienced homelessness or other challenges, the need to outbid competitors is an insurmountable hurdle to progressing to independent living.
According to thisismoney.co.uk1, Citizens Advice have seen a 30% increase in the number of people asking for help with deposits or advance rent payments in the last 12 months.
And it is not just a financial barrier that young people are facing. While adverts for rental properties cannot be openly discriminatory, there is nothing to stop landlords discriminating on the basis of something in a young person’s application, be it their age, gender, race, previous eviction or personal circumstances. Estate agents Mackay Property6 report that prospective tenants are routinely given forms to complete during viewings that not only ask for an offer amount, but also include a statement box where they must write “a heartfelt plea to the landlord”.
It is not difficult to imagine that an older, professional person would be able to present a more compelling case than a less established young person.
Kelly Headen, Supported Lodgings Manager at Step by Step, presents this situation in stark terms: “It is deeply concerning that the decision-making process is now based on unregulated ‘assumptions’ from a landlord. It is unquestionably unethical and open to significant discrimination.”
This concern is shared by Step by Step’s Sarah Muckart. “Expecting young people to compete and bid for a potential new home will make what is already a difficult stage in their life even harder. Properties should be offered fairly to anyone that can afford to pay the rent each month and maintain the property, not who the landlord picks via a bidding war.”
Young people are further disadvantaged when it comes to referencing. A change to the law in 2019 means that tenants no longer have to pay the fees associated with obtaining references. Instead, the landlord is expected to foot the bill. While this is ostensibly good news for tenants, in reality it has led to landlords seeking references only once they have already made the decision about who to let to; with so many potential tenants vying for each property, it would prove very costly for a landlord to obtain references for each initial applicant. This effectively means that references do not factor into a landlord’s decision making. Even if a young person has strong references, these would afford no advantage in being considered over rival applicants.
So what can be done to remedy this situation? There are clearly two distinct but related issues: firstly, the shortage of landlords and rental opportunities, and secondly, the bidding process which is increasingly replacing the first-come-first-served standard.
While tackling the shortage of rental properties would clearly require a long-term strategy, youth homelessness charity Step by Step suggests the latter issue – the intrinsically unfair bidding process – would be far easier to remedy with a change in the law.
“We must push for rental bidding to be banned in the UK, as is the case in New Zealand,” says Step by Step’s Kelly Headen. “We need to acknowledge the increased demand and the reduced supply in rental properties post Covid and put in place effective regulated measures to enable access to all.”
This refers to the recent change in New Zealand’s tenancy laws which took effect in February 2021. As published on tenancy.govt.nz7, the new legislation states that “rental properties cannot be advertised without a rental price listed, and landlords cannot invite or encourage tenants to bid on the rental.”
A similar change in UK tenancy law would level the playing field for young people struggling to find a place to live. As things stand, the ability for landlords to invoke a bidding process on rental properties prices young people out of the market and leaves them open to discriminatory practices. For the young people supported by youth homelessness charities such as Step by Step, it is yet another barrier to moving on to independent living.
1. thisismoney.co.uk – August 2021 – The cost of renting is driven to record high of £1K a month as a lack of properties to buy sparks bidding wars https://www.thisismoney.co.uk/money/mortgageshome/article-9902361/The-cost-renting-driven-record-high-lack-properties-buy-sparks-bidding-wars.html
2. buyassociation.co.uk – February 2022 – Government must recognise renting comes before homeownership
https://www.buyassociation.co.uk/2022/02/25/government-renting-before-homeownership/
3. The Times – August 2021 – Bidding wars break out for rentals in lettings hotspots
https://www.thetimes.co.uk/article/bidding-wars-break-out-for-rentals-in-lettings-hotspots-32szppgbf
4. inews.co.uk – January 2022 – Rent prices for new tenants rise to record levels
https://inews.co.uk/inews-lifestyle/money/bills/rent-prices-new-tenants-uk-rise-record-renters-lower-costs-1426806
5. Rightmove – January 2022 – Rental price tracker
https://www.rightmove.co.uk/news/rental-price-tracker/
6. Mackay Property – November 2021 – Demand for rental properties creates bidding wars
https://www.mackayproperty.co.uk/sawbridgeworth-property-blog/post-demand-for-rental-properties-creates-bidding-wars-1637744975
7. tenancy.govt.nz – February 2021 – Prohibiting rental bidding
https://www.tenancy.govt.nz/law-changes/phase-2/prohibiting-rental-bidding/
Like many young people leaving the care system, Harry suddenly found himself on his own and with nowhere to go. He was homeless at 19 years old when he was referred to our Supported Lodgings service.
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