Advertisement

Record immigration drives up rents across Britain

UK Immigration Housing Shortage
UK Immigration Housing Shortage

Record immigration has driven up rents by 8pc as fears mount that Michael Gove’s reforms will trigger a further drop in supply.

A huge number of people moving into the rental market from overseas was behind the bulk of the record rent growth recorded across the UK over the last year, new analysis shows.

Imogen Pattison, of Capital Economics, said net immigration had led to new demand for an extra 205,000 rental homes.

The figures come as Mr Gove, the Housing Secretary, forges ahead with plans to scrap no-fault evictions and more tightly regulate the private rental market through his Renters Reform Bill, which critics have warned will push more landlords to quit after years of tax raids.

Conservative MP Marco Longhi urged the Government to reconsider the bill as the rental sector grapples with an extreme shortage of homes.

He said: “At a time when we are seeing such a huge influx of people coming in from overseas, what we should be doing is increasing supply. It seems incredible that what appears to be happening instead is we are going to be reducing supply through the Renters Reform Bill. It just all comes together in a perfect storm.”

Home Office data released last week showed that net immigration hit a record high of 606,000 in the year to December. Based on the average household size of 2.37 people, this means net demand for housing jumped by around 256,000.

This increase is disproportionately concentrated in private rentals. Previous analysis by the Office for National Statistics shows that at least 80pc of people arriving in the UK move into the private rented housing for at least for the first couple of years after they move.

Based on this estimate, the number of households in need of rental properties will have swelled in the year to March by 4.4pc, Ms Pattison said. In turn, this would trigger a four percentage point drop in vacancy rates.

Analysis from the US shows that a 1pc drop in vacancy rates corresponds roughly to a 1pc increase in rents.

Ms Pattison said: “This could mean that net immigration in the UK could have increased rents by up to 8pc.”

This would have made up three quarters of the 12.1pc year-on-year rent growth recorded across the year in December in an index compiled by the property website Zoopla.

Benjamin Trevis, of the Centre for Economics and Business Research, said that the impact of immigration on rent prices is felt primarily in cities.

Nearly half of all of the UK’s foreign-born population lives in London and the South East, with 35pc in London alone, according to The Migration Observatory.

Annual rent growth in London hit 17pc in December, according to Zoopla. Rent growth also far exceeded the national average in other major cities including Manchester and Glasgow, where rents climbed by 15.6pc and 14.1pc respectively.

Mr Trevis said: “Supply-side issues mean any increase in demand could have an exacerbating impact and potentially push rental prices even higher.”

Rents have exploded across the UK since lockdown restrictions eased in the summer of 2021, when workers returned to cities just as international students came back to university and overseas travel restrictions were scrapped.

The Home Office migration data marked a fresh record for net migration after previous data showed an influx of 504,000 people in the year to June 2022.

The Government has become increasingly reliant on high levels of migration to fill gaps in the workforce, particularly within the health service.

The number of people moving to the UK on permanent working visas increased by nearly 100,000 in the year to March 2023, a jump of 97pc. This was roughly four times the pre-pandemic and pre-Brexit norm.

A 171pc surge in skilled workers in health and care – an extra 64,130 compared to the previous year – has been key. These visas accounted for more than half of all “worker” visas granted in the year ending in March 2023.

A DLUHC spokesperson said: “There is no evidence to support claims our reforms will hinder rental supply and lead landlords to leave the sector. The private rented sector has doubled in size since 2004 and good landlords have every reason to remain in the sector.

“Our reforms mean 11 million tenants across England will benefit from safer, fairer and higher quality homes, while ensuring landlords can swiftly evict problem tenants.”

Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month, then enjoy 1 year for just $9 with our US-exclusive offer.