Are renters the new underclass?

Tighter lending criteria for mortgages more people are having to rent for longer, but the UK rental system is skewed to fit the landlord and letting agent - not the tenant.

Those of you have been reading my column over the past couple of years will know that I’m still an aspiring first-time buyer who has yet to get my foot on that elusive first rung.

Crazy London house prices - where the average price currently stands at £266,198, £100,000 more than in the rest of the country - combined with the fact that many lenders now require a 20% deposit has forced me to remain part of the shambles that is the rental sector. And a shambles it certainly is.

Firstly, rent has risen to extortionate levels in recent times. According to figures from LSL Property Services, tenants in the UK are having to scrape together an average of £718 a month in order to keep a roof over their heads.

But the London market is particularly tough, with rents up 4% in the 12 months to June 2012 - a London tenant now has to pay an average £1,047 a month. The reason rental costs have gone absolutely crazy is mainly because of high demand as tighter lending criteria for mortgages means more people, just like me, have to rent for longer than they originally anticipated.

Added to that is an element of greed by private landlords who are enjoying some of the best yields they’ve ever had (6.2% in June, according to Lloyds Banking Group’s specialist buy-to-let arm BM Solutions). If the rent hike isn’t bad enough, tenants are also being swindled by letting agents whose only real business seems to be extracting as much money as possible out of people desperate to find somewhere to live.

During my time renting through one of UK’s biggest letting agents (I will keep its name anonymous, for now) I have been charged for drawing up a contract (£180), a credit check (£25), annual renewals of contract (£180 multiplied by the seven years I lived in the flat), and a check-out fee (£180).

Sure they have to make money somehow, but I think it’s rather ridiculous how a one-off credit check that costs £2 can suddenly become £25, and how printing off one page with new dates on it - which is how our contract was renewed - costs £180.

But my letting agent isn’t the worst by far - when I was looking for a new place to rent a couple of months ago I was told by one agent that signing a contract would cost me up to £500 (thankfully, I’m now renting through a private landlord). And that’s without adding the deposit, which is typically six weeks’ rent.

While any deposit should be held in a deposit protection scheme after new regulations came into effect in 2007, anyone who’s ever rented knows the chance of getting the full deposit back at the end of the tenancy is slim.

I had to fight tooth and nail to get the majority of mine back when I moved last month, and while I’ve been promised most of it back, as to date I still haven’t received it, despite UK legislation stipulating that any uncontested deposit should be returned to the tenant within 10 working days.

Lastly, while renting works out more expensive than owning your own home, sadly, it will hurt the most by the time you hit the later years in life. Because, as I talked about in my July column, most pensioners rely on being able to enjoy a mortgage-free life. For someone who’s never been able to get onto the property ladder that won’t be an option. They also won’t have a home to unlock any funds from - a lifeline for many retirees.

The whole UK rental system is skewed to fit the landlord and the letting agent, while there is little protection for tenants. With many families forced to rent because of the tough mortgage market, the government needs to clean up this market. If not, we may soon see a new underclass in Britain: renters.

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