Derby Tenant Deposits are almost £11,000,000

When the Tenant Fee Ban comes into force on 1st June,  tenant’s deposits will be capped at five weeks rent. This means that Derby landlords will soon only be protected in the event of a single month of unpaid rental-arrears, at a time when Universal Credit has seen some rent arrears quadrupling and that’s before you consider damage to the property or solicitor costs.

It can’t be disputed that the deposits Derby tenants have to save for certainly raises the cost of renting thus putting another nail in the coffin of the dream of home ownership for many Derby renters whilst at the same time, those same deposits being unable to provide Derby landlords with a decent level of protection against unpaid rent or damage to the property.

Based on average rents and numbers of tenancies, the total of all the tenants’ deposits in Derby, deposited or protected, is almost £11,000,000

When you consider the value of all the privately rented properties in Derby total £3,610,375,040, the need for decent landlord insurance to ensure that you are adequately covered as a Derby landlord is vital.

What About Tenants!

However, I want to consider the point of view of the Derby tenant.

Several housing charities believe spending more than a third of someone’s salary on rent is exorbitant, yet for many tenants, they find themselves in that very position.

I feel especially sorry for the Derby youngsters in their 20’s who want to rent a place for themselves, as they face having to pay out the rent and try and save for a deposit for a home.

The average 22 to 29-year-old in Derby spends 27% of their typical salary on a one bed rental property

….and 36% of their salary for a 2-bed home in Derby.

Startling Statistics…

40 years ago, British people who rented spent an average of 10% of their salary on rent, and only 14% in London.

Looking in even greater detail, according to the Office of National Statistics, over the past 60 years the proportion of total spending on all housing – renting and mortgages – has doubled from 9% in the late 1950’s to 18% today.  Whilst on the other hand, the proportion of total expenditure on food has halved; 33% to 16%, as has the proportion of total spending on clothing; 10% to 5%… it’s a case of swings and roundabouts!

…and Landlords…

Landlords also face costs that need to be covered from rents including mortgages, landlord insurance, rent guarantee protection (especially with the 5 weeks deposit cap coming…), maintenance and licensing.

In fact, rents in the last 10 years have failed to keep up with UK inflation, so in real terms, landlords are worse off when it comes to their rental returns, although they have gained on the increase in Derby property values – but, obviously, that is only realised when a property sells.

There are a small handful of Derby landlords selling some, or all of their rental portfolio as their portfolios become less economically viable with the recent tax changes for buy to let landlords, which will result in fewer properties available to rent.

Back to Supply and Demand..

However, this will reduce the supply and availability of Derby rental properties, meaning rents will rise – textbook supply and demand – thus landlords return and yields will rise.

Yet, because tenants still can’t afford to save the deposit for a home and we are all living longer, the demand for rental properties across Derby will continue to grow in the next twenty to thirty years as we turn to more European ways where the norm is to rent rather than buy in the 20’s and 30’s age range.

This will mean new buy-to-let landlords will be attracted into the market, buy properties for the rental market in Derby and enjoy those higher yields and returns…

Many things have a tendency to go full circle don’t they?