The Subplot | Resi rents roasting, Renaker, garden festival fun

THIS WEEK

• The blame game: what happens when housing policy goes wrong.
• Elevator pitch: your weekly rundown of who and what is going up, and who is heading the other way

WHAT HAPPENS WHEN GOVERNMENTS FAIL

You know who to blame

The cost of living crisis is more than a phase for private rental tenants in the North West’s towns and cities. It is going to get a lot worse before it gets better, and poor policy decisions could turn the crisis into a catastrophe.

City centre apartment rents in Manchester and Liverpool – and most towns, and most suburbs of the big cities – are rocketing. In some cases, they are up by nearly 30% in just 12 months. So it is no surprise the government is considering a rent freeze in social housing, and that there is the prospect of (unspecified) intervention in the private rented sector. But controls and caps could be futile, given the inescapable forces pushing rents up. And they could make things worse, not better.

Unaffordable

First, what’s the current state of play? A chronic shortage of properties, which shows no signs of easing, is pushing rents up. According to Urbanbubble, there are just 520 apartments available in the entire central Manchester/Salford/Trafford area, compared to 2,700 this time in 2020. Rents on one-bed flats are up 15.5% year-on-year and are now hovering around £1,000 a month (£977 on Tuesday, higher by now). This eats very heavily into a young graduate’s income. Someone earning £30,000 or less (before tax) could be at or near the tipping point where a landlord’s credit reference agencies would reject them. Add the effect of rising interest rates making it harder to service their debts, and thus leaving less room to pay rent, and the one-bed begins to look unaffordable.

Slightly less unaffordable

Hence more singles are pairing up to share the roughly £1,500 a month rent on a two-bed, sending demand through the roof, and pushing rents up by 29% in a year. “You look at rents, and average incomes, and you wonder if this rate of growth is sustainable,” says Urbanbubble data guru Ed Howe. “But I can’t see how the rental growth slows, because there’s simply not enough coming rental property to meet demand.” For the record, there’s about 14,500 units in the pipeline.

Coming to a street near you

This is no longer just a central Manchester problem; as central zone rents escalate priced-out tenants head to near-centre districts, and start to push up rents there, too. “Central Trafford is a good example. Tram stops, close to town, the rental trend is firmly up. Next it will be Levenshulme, Cheetham Hill…,” says Howe. Reside Manchester managing director Anthony Stankard agrees. “Stretford, Trafford, Ardwick, Levenshulme – they are all catching up. Stockport, too, where demand is huge because it’s just 11 minutes into Piccadilly. Rents for a two-bed in Stockport have hit £850, up from £650 a short while ago, so it’s already happening,” he says.

No better

It’s the same story in Liverpool, where rents are up 12% year-on-year across all size ranges, says City Residential managing director Alan Bevan. There’s some sign (as there is elsewhere) of tenants trading down, but the impact on the market is marginal. “Demand for studios, which were always hard to shift, has gone through the roof, and there’s a little more interest in the lower- to middle-end of the market as tenants trade down, but the truth is there’s nothing much available.” Note that increased interest in less smart properties has the effect of pushing their rents up, too. So the misery spreads.

A call worth resisting

Something must be done, surely? Well, maybe. So far the evidence suggests government intervention is far from helpful. Changes to the tax regime affecting the landlords of private rented property, plus a rising regulatory burden, have convinced a large (but undefined) number of landlords to quit renting. In a hot property market they calculate it makes more sense to cash in their property and claim the capital value. Subplot cannot verify some of the numbers bandied around – for instance, it seems over-the-top to claim that the number of rental properties on the market has halved between 2019 and today – but who knows? Clearly something is screwing up supply of new rental properties, as any letting agent will confirm.

Who could have guessed?

The supply of rental property could shrink even further. Today many landlords simply can’t sell rental flats thanks to cladding issues, so they continue to rent. Subplot has been told repeatedly that the steady drip, drip of landlords will turn into a flood the moment the cladding crisis is resolved. “As the cladding clears up, we’ll find landlords will sell flats which today are rentable but effectively unsellable,” Stankard explains.

And then this

Add a government-imposed rent freeze, or something like it, and you could enter the same league as Ireland’s basically dead private rented sector. Just a few hundred properties are now available throughout the Republic, and the rental sector is in turmoil. Stankard warns that modest local regulation in Salford is already shrinking the rental market. “OK, so you want to share with a mate or two mates – but you might not if you are in Salford because the houses in multiple occupation rule will catch you. Landlords could apply for a licence, but that’s £1,000 a year, and the alternative is not to let three-bed flats to three adults sharing, and that restricts supply in the market,” he says.

Solutions

The answer? Nobody knows. Welcome changes to Manchester’s bus regulation may speed up city travel, taking pressure off rental markets in the centre, and spreading demand more evenly over the conurbation, but that’s just conjecture and it won’t produce instant results. The consensus is that, short of a complete economic meltdown, the strong student populations in North West cities will keep the rental market afloat and rents rising, albeit more slowly. Maybe some renters will go back to their parents, or trade down to less ritzy properties. But nobody expects a big change. The danger is that this crisis is moving from acute to chronic, with all kinds of labour market and economic consequences, none of which sit well with ambitions to level up.

If public policy relentlessly focuses on home ownership, and then restricts private rented landlords either through tax or regulation, this is what happens.

ELEVATOR PITCH

Going up, or going down? This week’s movers

Sometimes going up feels inevitable, going down unavoidable. This week Renaker makes a repeat appearance in the first category, while Liverpool’s Garden Festival heads the other way.

Renaker, again

Some deals are truly golden, and a 250-year lease with a public sector tenant is as golden as they get. If the property concerned is also funded by a public body, then bingo. NHS Property Services has signed a 250-year lease on 8,000 sq ft within Renaker’s 52-storey Elizabeth Tower, Manchester. Two hundred and fifty years! The medical centre is to be funded with the help of a £2.6m grant from Manchester City Council, Place North West discovered.

Great news for the many residents of Great Jackson Street. Together with the school it helps create some long-absent community facilities. The medical centre was a condition of planning approval, which maybe looked like an onerous condition at the time.

The Garden Festival site, again

Four years after Ion Developments was chosen to develop 1,500 homes on a large chunk of the Liverpool Garden Festival site, and we’re told to stand by for further announcements. In the meantime the lack of a formal contract between Ion and Liverpool City Council is now beginning to impact on the site remediation, with the City Region authorities withholding £11.8m until they see the paperwork.

Yes, lots has changed since 2018 when the Ion appointment was made, including Ion buying out their JV partner Midia, a pandemic, a housing crisis, and the more-or-less complete collapse of the city council’s property and estates function. But, honestly. This has been dragging on since 1984. Repeat: since 1984. Madness, as someone wisely said, consists of doing the same thing again and again but expecting different results.

Get in touch with David Thame: david.thame@placenorthwest.co.uk

The Subplot is brought to you in association with Oppidan Life.