Top landlord Grainger says it will reap the rewards of wage inflation

The landlord, which rents out 10,000 homes across the UK, today revealed that its rental income had grown by 12% in the six months to the end of March, while its adjusted earnings were up by 2% to £47.1 million.

CEO Helen Gordon said her business was well-placed for an era of economic uncertainty, thanks in part to the fact it is a ‘beneficiary’ of rising prices and wages.

“Our net rental income is strongly linked to wage inflation, and therefore benefits from a high inflationary environment,” she said.

“There’s a strong correlation between wage inflation and net rental income. We closely correlate to wage inflation because that’s people’s ability to pay. Our homes are still very affordable.”

However, she dismissed the idea that Grainger was taking advantage of the cost-of-living crisis, pointing out that the rises in line with inflation have come at a time of limited supply and soaring demand.

“There are some landlords trying to take advantage of that disconnect between supply and demand but I think our properties remain affordable,” she said.

She noted that rents are up by 6.8%, which is almost exactly in line with wages, while tenants pay 29% of their wages on rent, which is below the national average of 33%.

Grainger has partnered with Transport for London to build 1,240 new homes around tube stations. Their joint venture, Connected Living London, has now acquired the land for four of these five schemes from TfL.

“We are confident in the outlook for our business. With positive expectations for the occupational market and rental growth, resilience in valuations backed by strong active investor demand, and an institutional-landlord-friendly investment landscape, the outlook for Grainger remains strong as we continue to lead the sector,” Gordon said.

Analysts at Peel Hunt were bullish on Grainger, calling its latest update “one of the sector’s most optimistic outlook statements”. Shares are up 1.9% to 271.0p today.

The results come as the Government aims to pass the Renters' Reform Bill, which would introduce a number of changes for renters including an end to no-fault evcictions. Gordon said an end to no-fault evictions was something she welcomed, but had some concern about whether the bill would make it too challenging to evict tenants when there is cause to do so.

“Because one of our key metrics is to retain people, we’re generally supportive of that,” she said. “The real challenge we see is that when there are fault evictions — if there’s a bad neighbor or antisocial behavior. There are bad landlords but there can also be bad occupants.”