Why the pandemic is not making your rent cheaper

Despite fears Covid-19 would cause the death of the city, rents fell by more than 1 per cent in only five of the UK’s 50 largest urban centres last year.

By Katharine Swindells

A year ago, as the country went into lockdown and workers set up offices at home, many hypothesised about the death of city centres.

This was not bad news for everyone. Some were excited by the idea that long-term shifts in working habits might reduce demand for housing in cities, and with it rent costs for young workers permanently.

But analysis of rental data and internal migrations, looking specifically at those in their mid-to-late twenties, shows that this theory has not become a reality.

In most UK cities there has been little change to rent prices: only in London have tenants benefited from lower rents, and those are expected to return to pre-pandemic levels soon. In fact, experts predict that far from permanently bringing down rents in the capital, the end of the Covid-19 crisis may well cause them to soar.

Analysis of GP registration data shows that London is the only UK city to experience significant “city flight”. Between April 2020 and March 2021, 84 per cent of clinical commissioning groups (CCGs) in England recorded tiny changes – an increase or decrease of less than 2 per cent – in the number of 23 to 30-year-old registrants they have on their books. Only five CCGs recorded declines of more than 3.5 per cent of this age group, and these were all in London.

Although it is true many young people moved out of cities in the past year, this data shows that many of those didn’t bother to register at a new GP, suggesting these moves may have been temporary.

“There’s a long history of people claiming communications technology will mean the end of cities,” said Anthony Breach, a housing researcher at the Centre for Cities think tank. “Look back to see the introduction of the telegraph, or the postal service, or the telephone, and you had people saying we don’t need to cluster together in cities.

“Not only does that not happen, but it seems that the opposite happens. As it becomes cheaper and easier to exchange more information over vast distances, the remaining information that can only be exchanged face-to-face becomes, relatively, more valuable.”

Will Covid-19 make city rent prices cheaper?

To the frustration of housing analysts, data on UK rent costs rarely separates average prices by size or type of housing (for example, whether the property is rented by a house-share, a couple or a family).

Data provided to the New Statesman by the rental advert website SpareRoom taps into the specific renting experience of young housesharers. It found that between the end of 2019 and mid-2021, rent prices advertised on the site fell by almost 10 per cent on average in London.

In Birmingham and Edinburgh, rents fell by 7.5 per cent and 6.8 per cent respectively in the same period.

This trend was not recorded across the rest of the country. Of the 50 largest cities and towns in the UK, only five saw rents fall by more than 1 per cent during 2020. In fact, many of the country’s cities and biggest towns saw rents rise during the pandemic, with places such as Sheffield, Plymouth and York recording significant increases.

Anya Martin, director of the housing campaign group Priced Out, said the Covid-19 crisis has proved that London's housing market is driven by supply and demand, “[The pandemic] has been a fantastic example of everything we knew about how prices are set,” she said. “When we had this sudden out-flux of people leaving cities, and moving back in with their families, a lot of people left the country and went back to Europe if they were European migrants, then we very immediately saw a massive drop in rents in the centre of cities.”

By this logic, any falls in rent prices won’t last. In the past three months, London’s average monthly SpareRoom rental rose for the first time since the pandemic began, and Birmingham experienced the smallest decline of the year – less than 0.25 per cent.

Type city names into the search bar to compare rent prices throughout the pandemic:

Of course, this issue is far bigger than Covid-19. While London is still the most expensive city in the country, others are not far off it, with rents rising faster than wages. In Oxford, the average SpareRoom rent is 39 per cent of the average young person’s income, the same as in the capital.

In fact, Breach warned, London’s housing supply crisis could swiftly become worse than it was in pre-pandemic times.

With surveys suggesting as many as 84 per cent of businesses plan to continue hybrid working in the long term, employees need to live in properties with space for home-working.

“We know in housing economics that rising incomes basically drive the consumption of floor space: as you get higher income you will spend more and more on space in your area,” said Breach. “And that’s a good thing, that’s part of living standards.”

However, as people who can afford bigger properties take up more space, the amount left for everyone else decreases, which only intensifies the supply crisis, and drives prices up further.

The answer, campaigners say, is simple: more homes. As Martin explains, if cities are seeing economic growth but aren’t building more homes, they will go the same way as London.

“If, for instance, we see a lot of economic growth in Manchester and Liverpool, and you do not build enough homes, then all of that money that’s coming into your economy will end up going into the hands of landlords, or people who already own property, through the measure of increasing prices.”

In recent years, rent prices have risen steeply in many cities, as Zoopla’s rental index, which averages across all rental properties, shows. London’s chronic housing crisis should be a cautionary tale for these urban centres.