Should I increase the rent every year?

Should I Increase the Rent Every Year?

If you haven't reviewed your rent in the last 12 months, you've probably lost over £500 this year. Possibly a lot more. Here's why that happens, what the law now says about it, and the approach we take at NGU Homes that keeps our landlords ahead without pushing good tenants out the door.

The cost of doing nothing

Private rents in the North East rose by 5.9% over the last year - the fastest growth of any English region in the country. If you haven't reviewed your rent in that time, here's roughly what you've left on the table:

North East regional average: current average rent £776 pcm, a year ago approximately £728 pcm, monthly loss £48, annual loss £576 per property.

Newcastle specifically: current average rent £1,206 pcm, a year ago £1,073 pcm, monthly loss £133, annual loss £1,596 per property.

Multiply that across even a small portfolio of three or four Newcastle properties and you're looking at over £6,000 in lost income in a single year. Not reviewing the rent isn't a neutral decision. It's a choice to fall further behind every year.

What's changed under the Renters' Rights Act

Landlords can still increase rent every year, but the process is now more formal and the rules are stricter. Rent can only be increased once per year, and not in the first 12 months of a new tenancy. The increase must be at or below the open market rent. Rent review clauses in tenancy agreements are now null and void. Tenants can challenge any increase they believe is above market rent at the First-tier Tribunal.

The rule that catches most landlords out is Form 4A and the 2-month notice period. You can no longer agree a rent increase informally with a tenant, even if they're happy with it. Every increase must be served using the official Section 13 process on Form 4A - Landlord's Notice Proposing a New Rent for Assured Tenancies in the Private Rented Sector - at least two months before the new rent takes effect. Get this wrong and the increase simply doesn't stand.

Reviewing rent and maximising rent are not the same thing

At NGU Homes, we review every property every year without fail. But for long-term tenants, we deliberately keep rents around 5% below the open market rate. A 5% discount on a £1,206 pcm Newcastle property costs £60 a month, or £720 a year. One month's void costs £1,206. The maths isn't close.

Here's what the 5% strategy actually delivers:

Longer tenancies, fewer voids. A tenant who knows their rent is fair is far less likely to move. Every extra year a good tenant stays is a year of void costs, referencing fees, and re-let charges you never have to pay.

Lower maintenance costs. Long-term tenants treat a property as their home. They report problems early rather than letting them escalate, which keeps small issues from becoming expensive ones.

Good tenants are worth more than the rent they pay. A tenant of three, four, or five years has saved you thousands. Keeping their rent slightly below market builds the kind of relationship where problems get resolved with a phone call rather than a formal complaint.

Bulletproof against a Tribunal challenge. Keeping rents 5% below market means you're well clear of any First-tier Tribunal challenge.

How we handle this for our landlords

Every year, as part of our management service, we review every property against current market rents, apply the right increase, handle the Form 4A, and make sure everything is watertight. For long-term tenants, we keep rents 5% below market. For new lets, we price at the market rate from day one.

The bottom line

Yes, review the rent every year. Rents in the North East are rising faster than anywhere else in the country, and not keeping pace means losing real money every single year. But the landlords who do best over 10 or 20 years aren't the ones who push rents to the ceiling. They're the ones who keep good tenants, protect their income from voids, and build a portfolio that runs quietly and consistently in the background.

That's exactly what we do at NGU Homes. If you'd like us to handle the rent review process for your portfolio, get in touch.

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