The Impact of Utilities on Rent
by Anthony Smith, Graduate Consultant
The Rising Cost of Utilities
As economies began to recover following pandemic-related lockdowns, global prices for gas, electricity, and oil surged. This upward trend was exacerbated in February 2022 when Russia’s invasion of Ukraine further strained global energy supplies. For British consumers, the most immediate impact was felt by those under the energy price cap, with a 54% increase in April 2022. Wholesale prices for gas and electricity in the UK reached unprecedented levels and have yet to return to pre-crisis figures.
According to the House of Commons Library, the average annual energy bill for typical gas and electricity consumption under the direct debit price cap (July to September 2024) is £1,568. However, the price cap peaked at £2,380 between October 2022 and June 2023. Projections indicate that the price cap will rise by 10% in the fourth quarter of 2024 and an additional 3% in the first quarter of 2025. Currently, the average cost of gas is 5.5 pence per kilowatt-hour (kWh), while electricity is priced at 23.4 p/kWh.
A recent survey by NatWest revealed that 44% of renters feel less confident than before about meeting their energy costs, likely due to concerns that landlords may raise rents to offset rising utility expenses. In some cases, landlords may also introduce a "fair usage" clause, limiting the amount of energy tenants can use before incurring additional charges.
These rising utility prices are contributing to broader inflation, further straining household budgets and making it more difficult for tenants to afford both rent and energy costs.
Research by Rightmove highlights the significant impact of energy efficiency on utility bills. Homes with poor energy efficiency could see annual utility bills rise by £558, while homes with an energy performance rating of A may only experience a modest £56 increase. Rightmove’s survey also found that 70% of homeowners and 76% of tenants would be willing to adjust their routines to lower their energy bills, underscoring the growing importance of energy efficiency for both investors and tenants.
SAY’s Role in Mitigating Cost
By assisting clients with OPEX and service charge budgets, we provide a clear and comprehensive overview of anticipated operational utility costs. By staying up to date on the latest market trends and innovations, we can offer valuable insights on new strategies to help clients reduce their utility expenses. Additionally, we provide expert asset management advice to optimise existing processes, helping clients enhance efficiency and drive long-term cost savings.
For more information on our rental living services, get in touch now.