Previously a prerogative of students and young professionals, flat share is now a common option for a wider spectrum of the population. Over 3 million people in the UK live in a house in multiple occupation (HMO) – there are over 500,000 in the Country – with the vast majority concentrated in London. In these properties, tenants have their own bedroom and share the communal areas (kitchen, bathroom, living room, etc.) with other occupiers.
On the consistent rise over the last decade, HMOs represent a great way to knock down the living costs for university students and low-paid workers. This is especially true in London, where the rent in the cheapest areas is still more expensive than anywhere else in Britain.
With buying prices on an all-time high, it’s now common knowledge that fewer and fewer people can afford to own a property (which prompted the word “ladder” to be used as never before). Therefore resorting to share an apartment has spread to working professionals, even on high salaries, who choose this way to save for a deposit and purchase their first home.
As it always happens, more demand for HMOs equals higher prices.
Over the last 10 years, Room Club has closely monitored the evolution of this market, and it is now able to draw some conclusions on how prices and conditions have changed since when we started our business in 2009.
To do so, we have analysed over 24,000 room lettings, interviewed several professional landlords who manage a combined portfolio of nearly 5,000 rooms in HMO properties and cross-referenced our data with information taken from more than 20,000 listings on the main web platforms.
The number of licensed HMO properties in England has nearly tripled since 2009 (having doubled in the last half decade alone). The prices for a single room in London 10 years ago, when Room Club started its operations, seem so low that wouldn’t sound out of place in a grandad’s fireplace tale.
Even though rents are different depending on the area (more on that later), we used our data history to draw an average price that reflects the change we had to this day. Warning: looking at the resulting chart may cause discourage.
The number of licensed HMO properties in England has nearly tripled since 2009 (having doubled in the last half decade alone). The prices for a single room in London 10 years ago, when Room Club started its operations, seem so low that wouldn’t sound out of place in a grandad’s fireplace tale.
Even though rents are different depending on the area (more on that later), we used our data history to draw an average price that reflects the change we had to this day. Warning: looking at the resulting chart may cause discourage.
Last decade comparison – average rent of a room in London
| 2009 | 2019 | % Raise | Last 10 years’ inflation | |
| Single room in zone 1 | £150 | £205 | 36.6% | 27% |
| Single Room in zone 2 | £115 | £165 | 43.4% | |
| Single room in zone 3 | £95 | £130 | 36.8% | |
| Twin (double) room in zone 1 | £200 | £260 | 30% | |
| Twin (double) room in zone 2 | £170 | £220 | 29.4% | |
| Twin (double) room in zone 3 | £145 | £190 | 31% |
Prices are per week, with bills and council tax included, rounded to the nearest £5.
Understandably, another decisive factor to affect average rents is the diversity of areas in London. As much as we all would love to live in a Made in Chelsea episode, sharing a designer kitchen leading on a newly renovated patio – as big as my entire apartment – where our flatmate is sunbathing while browsing the last Vogue issue featuring herself on the cover, reality is often more frugal. For the vast majority of people, a semi-hidden cul-de-sac in Lewisham or that council estate in Ealing are what money can buy. But, after all, everything is a 30-minute tube journey away. Right?
Average price in London by area – 2019
| Area | Post code | Average weekly rent | Monthly |
| Abbey Wood | SE2 | £119.00 | £515.67 |
| Bounds Green | N11 | £128.00 | £554.67 |
| Tottenham | N17 | £135.00 | £585.00 |
| Leyton | E10 | £138.00 | £598.00 |
| Lewisham | SE13 | £147.00 | £637.00 |
| Finsbury Park | N4 | £157.00 | £680.33 |
| Ealing | W5-W13 | £159.00 | £689.00 |
| Brixton | SW9 | £167.00 | £723.67 |
| Canary Wharf | E14 | £176.00 | £762.67 |
| Hackney | E8 | £178.00 | £771.33 |
| Clapham | SW4-SW11 | £186.00 | £806.00 |
| Greenwich | SE10 | £198.00 | £858.00 |
| London Bridge | SE1 | £202.00 | £875.33 |
| Camden | NW1 | £205.00 | £888.33 |
| Shoreditch | EC2A | £206.00 | £892.67 |
| West End | WC1 – WC2 | £223.00 | £966.33 |
| Chelsea | SW3 | £225.00 | £975.00 |
| Westminster | SW1 | £229.00 | £992.33 |
| South Kensington | SW7 | £243.00 | £1,053.00 |
| The City | EC2-EC3-EC4 | £247.00 | £1,070.33 |
Source: 23,489 ads on RoomClub.com Prices for a double room for single use, per week, with bills and council tax included.
As you can see from the chart above, there is a quite impressive price gap between the most internationally famous areas of London (the likes of Kensington, Camden or the City) and some postcodes in zone 2 or 3. Perhaps more surprising is the fact that the gap is more or less the same as 10 years ago.
With some notable exceptions such as Hackney and Shoreditch – where prices have rocketed due to the new wave of hipster nightlife, the artistic movement sweeping the eastern part of London and an ever-increasing gentrification – both the most expensive and the cheapest areas alike remain the same.
The City leads this quite depressing-to-look-at table, with its EC4 postcode (Temple, Blackfriars and the like) taking the crown with an average weekly rent exceeding £320. Yes, for a room. Sorry, what’s that? You pay less for an entire 2 bedroom apartment in Leyton?
Whilst this is not necessarily a bad thing, Abbey Wood keeps being at the bottom of this chart, with an average weekly rent of just £119. That’s a bargain, isn’t it? Well, hold on for a second. This figure is still higher than the rent in any of the 50 biggest towns in the UK!
Some of you will inevitably be taking to Google Maps to check where Abbey Wood is, and we can’t blame you. London has so many transport links that even from zone 3 or 4 you can still commute to the center in a very reasonable time. When considering the next move, it may be worth spending some time studying the connections and compare the prices. You might just discover a new, up and coming area where your landlord won’t receive half of your salary.
It’s a lesser-known fact for renters, and one that industry workers often fail to mention, but not all deals are created equal. Rental prices are a direct consequence of the letting conditions. For example, the length of the contract often dictates a huge swing in costs. Renting a room for 3 months or less inevitably results in a premium to pay, in comparison to a standard 12 months’ let. The average increase is around 25%.
That being said, there are some companies in London that can offer cheaper price points even on short-term contracts. This is often due to the high volume of business generated, large portfolios and the fact that the solutions are tailored to students, interns and young professionals. Room Club has partnered up with many of those professional landlords, personally assessing the quality of the service and the accommodation to make sure nothing is left to chance.
Aside from the contract’s length, two other things often influence the rental price: the deposit amount and the first rent instalment. The majority of adverts we analysed list a standard 1 month-1 month solution (the first month’s rent to be paid in advance and the same amount as a deposit). In the last 5 years, however, there has been an increasing trend to make this requirement more affordable, with many companies offering a lower deposit (equal to 2 or 3 weeks’ rent) and first instalment (2 weeks, or even 1 in some cases).
As we mentioned in our introduction, the substantial diffusion of the flatsharing model is a direct consequence of the incredible rise in house prices. This has created the “generation rent 2.0” parallel to the most (sadly) famous one.
Even with the government’s intervention, introducing schemes such as help to buy, shared ownership, etc. it’s still pretty hard for millennials and subsequent generations to be able to afford a property in London. Many resort to share an apartment just to save up for a deposit (in London it’s usually above £20,000 with one of the schemes, even more without it)
We all know that this brought many people away from home ownership and towards the private rented sector (PRS). This created a surge in the demand for properties to let. This demand, however, was not matched by an equivalent increase in the offer. More demand for the same inevitably meant a sharp rise in rent prices. As much as we would love to think it’s all the bad guys’ fault, it all boils down to the most basic of market laws.
To counter this phenomenon, the only available solution to prospective tenants was to join forces. This is far from being a new thing, but it is only recently that flatsharing has known an impressive diffusion, giving birth to another category of tenants. Sharing a flat can be a nice thing, but the reality is that most people are forced into it rather than actively choosing this way of living.
To have a better understanding of this, let’s have a closer look at how hard it is for many people to live in London.
Many people living in a shared accommodation are often young workers or students, therefore it is common to find them on the lower end of the wage spectrum. The minimum wage in London is £8.21 for people aged 25 and over, therefore a full-time employee (40 hours per week) can expect a monthly salary of circa £1,250. Some people will look at this figure in awe and shock, but that’s how it is for more people than you can imagine.
Here’s a more detailed breakdown of the average monthly living costs:
| Rent | £700 |
| Travel | £130 |
| Food | £140 |
| Leisure expenses (including mobile phone) | £130 |
| Clothing, toiletries and household costs | £80 |
| MONTHLY TOTAL | £1,180 |
| Amount of monthly wage saved | £70 |
The cubicle that you hate so much is not that bad after all, huh?
On that note, the average salary in London is £35,200 per year – or £2,270 per month – so chances are you are not that far from this figure and quite ok with your (still super expensive) rent. And if you earn more than that, well, just spare a thought for the less fortunate.
We have seen so far a detailed account of the flatsharing market. But how about the old-fashioned, more traditional side of letting?
The main difference between a room and an entire property, you guessed it, is down to money. Unless you are renting from your mom (one of my mates actually does it, paying full market value) or another generous relative, you will have to fork out a substantial sum to move in.
The table below gives a brief recap of this
| 1 bedroom flat | 2 bedroom flat | 3 bedroom flat | |
| Average rent | £1,343 | £1,788 | £2,079 |
| 1 month’s deposit | £1,343 | £1,788 | £2,079 |
| 1 month’s rent in advance | £1,343 | £1,788 | £2,079 |
| Agency fee* | £250 | £250 | £250 |
| TOTAL | £2,936 | £3,826 | £4,408 |
*Agency fees for tenants will be scrapped from the 1st of June. The above is an average cost for 1 person at the time of writing.
But money is not everything (although it helps a lot). Any prospective tenant, by law, needs to undergo a certain referencing process. This involves having a source of income, proving to earn enough to afford the rent, having the right to reside in the UK and providing a couple of character references (basically your manager or your previous landlord saying how great you are and that you’d make a good candidate for any Nobel prize).
Nowadays more and more professional HMO companies require references, although this is usually way easier than going through the traditional letting agencies. In any case, if you are looking to save money or you just started working and don’t have enough references to provide, renting a room remains your best shot. Until you are able to spend a fortune to rent your first place by yourself, that is.
We feel this article won’t be complete without a deeper look at what the prices are in different areas of London. Let’s consider the same postcodes we saw earlier. This time we will reference a standard 2 bedroom flat – partly because that’s the most common listing in London, partly because prices bigger properties will probably make you faint.
| Area | Post code | Average weekly rent | Monthly |
| Abbey Wood | SE2 | £243 | £1,052 |
| Leyton | E10 | £306 | £1,324 |
| Bounds Green | N11 | £325 | £1,408 |
| Tottenham | N17 | £326 | £1,412 |
| Ealing | W5-W13 | £338 | £1,464.00 |
| Lewisham | SE13 | £345 | £1,497.00 |
| Finsbury Park | N4 | £375 | £1,625.00 |
| Greenwich | SE10 | £381 | £1,650.00 |
| Brixton | SW9 | £385 | £1,670.00 |
| Canary Wharf | E14 | £402 | £1,740.00 |
| Hackney | E8 | £410 | £1,777.00 |
| London Bridge | SE1 | £412 | £1,785.00 |
| Clapham | SW4-SW11 | £420 | £1,821.00 |
| Camden | NW1 | £500 | £2,167.00 |
| Shoreditch | EC2A | £527 | £2,283.00 |
| West End | WC1 – WC2 | £575 | £2,492.00 |
| South Kensington | SW7 | £698 | £3,023.00 |
| Chelsea | SW3 | £738 | £3,196.00 |
| Westminster | SW1 | £741 | £3,211.00 |
| The City | EC2-EC3-EC4 | £753 | £3,267.00 |
Prices for a 2 bedroom apartment, furnished, excluding bills and council tax.
As you can see from the above, there are only a few changes from the previous location chart. Significantly, though, the biggest leap is registered in Greenwich, where a room is more expensive in proportion to an entire apartment. This is due to the area being a big student hub, and one of the most sought-after for HMO properties. In comparison, newly affluent areas such as Clapham, a haven for 30-something professionals, see the opposite effect with room prices being proportionally cheaper.
Traditionally more clear and specific for the traditional lettings market, the rules and regulations for the flatsharing industry have always been a sort of grey area. In absence of detailed criteria, the number of ridiculous, when not dramatic, episodes that every now and then make the news it is no surprise.
The government has recently introduced a range of dispositions aimed at finally tidying up the mess in the HMO market, imposing heavier regulations and upping the fines for non-compliant subjects. This is part of a bigger scheme that in the last 10 years has seen the balance of power increasingly shifting from the landlords to the tenants.
However good the legislator’s intentions were, a healthy arrangement is yet to be found. In light of the numerous changes, the market had to adapt itself.
The main outcome of the government’s actions is very likely to be an increase in the rent prices.
Let’s see why.
The most noticeable provision will be the long-debated, forever-delayed tenant fee ban, in force from the 1st of June 2019. From that date, all letting agencies (including the ones operating in the flat share market) won’t be able to charge any money to tenants for renting a property.
This will be applied to many other fees such as renewals and extension of contracts, inventory, and so on. That is an incredible plus for a large part of the population, and the amounts that will be saved are huge. Relocation companies, short let platforms and holiday letting organisations will still be able to charge a small fee for their services.
A less obvious but important change is that there will be a capping on the security deposit amount, that will go from the current standard 6 weeks’ rent to 5 (for properties with rents up to £50,000 per year – so literally every home that I have ever stepped foot in). This will also save a sizeable chunk of hard-earned cash, nearly £64 million a year.
The best change in terms of living standards has come at a more bureaucratic level. Starting from October 2018, it has become mandatory for almost every property where 5 or more people live to be licensed by the councils (except for a single household family of course). This means that a very large number of houses and flats now need to comply with specific regulations regarding health and safety, facilities and the size of the rooms (some time ago it was ok for a bedroom to be less than 6 sq. meters – no wonder Britain has never been great at basketball).
The licensing process is often long and complicated, and many interventions are necessary to make sure that the property is fully compliant. As a consequence, many landlords started reducing the number of tenants in their properties. Until a couple of years ago, it was quite common to find apartments shared by 6 or 7 tenants – even more in some cases. With the new law in force, that number is now between 3 and 4. It seems that the morning queues for the bathroom are finally about to be a thing of the past.
So far so good, right? Well, not as much as you’d think.
Landlords and property management companies will now have no income from the administration fees (it’s a considerable amount, regardless of the size of the business), less cash flow from the deposits and less tenants in the properties (so lower margins and less business in general). It’s highly implausible that they will all just sit and do nothing to make up for the loss of income. The most likely thing to happen to balance things out is an increase in the rent charged to tenants – almost inevitable, as this is the only area that is not regulated or capped and therefore up to the market. If everybody does it, the market will soon reflect this and prices will be even crazier than now. In addition to this, as a collateral damage, letting agencies will have less resources to pay their employees and will be forced to let some go.
Room Club has interviewed 20 professional landlords and property management companies, and 18 of them confirmed that, on average, each tenant will have to pay an extra £5 per week to allow the business to keep its operations running. The other 2 said that they haven’t settled on a strategy but increasing the rent is “the easiest option on the table”.
The government took action because it wanted to simplify the comparison of market prices and offers, and we believe it accomplished that. Unfortunately the industry is so big and diversified that it’s impossible that such changes won’t cause reactions and trigger a range of coping mechanisms.
In the last decade, the net migration from the EU (who comes to London minus who leaves) exceeded 430,000 people. In 2017, 3.6 million people living in London (basically one third of the population) were born overseas.
It is inevitable that Brexit will affect the property market, and everyone in the industry is bracing for the big changes that this will bring. We have asked our network of professional landlords and the general feeling is a mixture of uncertainty, concern and healthy determination.
“We have a lot of customers from the EU, especially Italy and France,” says Tom, sales director of an accommodation company that manages over 600 rooms. “We are receiving a lot of emails from worried tenants asking whether they will be able to stay in our properties, and many of them actually moved out of the UK altogether. Until an agreement is reached it’s hard to foresee how exactly this whole ordeal will impact our business, but we are opening to other markets to make sure we keep things running smoothly”.
Professional relocation agency DaLi said: “During the past 6 months we have seen a surge in the demand of housing coming from EU citizens, who evidently are rushing to the UK before the deadline of 29 March. It’s great for the business in the short run, but it makes you think about what’s next. I believe everyone in this industry will feel some consequences”.
Matt, a professional landlord with a portfolio of 25 properties, seems to think differently. “I run thorough checks on the applicants and I cater for professionals with no affordability issues. High-skilled employees will always have the right to move to the UK, I don’t think Brexit will change any of that. You need to offer higher standards and make sure the properties are seamlessly run, but I think companies like mine will be alright.”
As with pretty much everything about it, the only sure thing about Brexit is uncertainty. The accommodation market will definitely change soon, and only time will tell if for the better or the worse.
In the mean time the new Generation Rent 2.0 is starting to get its shape.
