Only highest earners are able to rent privately at affordable cost

7th October 2021

Latest ONS figures have highlighted that private renters on median income could expect to spend 23% of their income on a median-priced rented home in England.

These figures are down from a recent high of 26.3% in 2016 because recently average wages have grown faster than average rents. The figures showed that East Midlands and North West are the most affordable rental regions for lower-income households living in the region.

In London, only a household in the higher income quartile would be able to rent a property without spending more than 30% of their income on rent.

Sarah Coles, Personal Finance Analyst, Hargreaves Lansdown said “In 2020, on average, we spent just under a quarter of our income on rent. However, the averages only tell a small part of the story. In reality, an awful lot of renters faced an uphill struggle, which has become even harder in the interim.”

“There are massive regional differences, and despite rent cuts during the pandemic, renting in London is still eye-wateringly expensive. In the capital only the 25% richest people could describe rental as affordable (where rent makes up 30% or less of your income). It means that for all but the best off in the capital, rents are ruinous. Elsewhere in the country, you need to be careful about averages. During the pandemic, a rise in the average wage was the result of more people on lower incomes losing work, so a rising average wage wasn’t a sign that everyone was getting richer: in fact it was the result of those on low wages losing work and becoming poorer.”

“Similarly, higher rises at the top end of the wage spectrum can distort the average, which is why the statisticians also looked at whether people on the lowest 25% of incomes could afford the lowest 25% of rents. That’s when they found that the East Midlands and the North West are the only regions in England where people on the lowest incomes could afford the cheapest rents. And changes during the pandemic have made renting more difficult. Outside London, rents in England rose 2% in the past 12 months. Overall, UK rental prices have increased by 10.9% since January 2015.”

“In some areas things have got even more difficult since 2020, because rents are rising particularly fast. Separate ONS data showed that in Northern Ireland, rents are rising 4.3% a year, while in the East Midlands rents are up 2.7% and in the South West they’re up 2.6%. It doesn’t take average rents to rise to push your rental costs up significantly. More hybrid working and working from home means people need more space, so your costs can rise even if local rents overall don’t.”

“Life could get even harder in the immediate future, because many landlords are cashing in on house price rises and selling up, while others are switching to holiday lettings. According to RICS, the number of rental properties coming to the market has dropped relentlessly over the past 12 months. This is pushing rents up, and agents expect them to go even higher: RICS is predicting annual rises of 2.5%. It means if you want to live in an area of high demand and low supply, you could easily end up paying far more than 23% of your income to get the property you want.”

“This is why it’s especially important for renters to keep on top of their spending. By far the easiest way to do this is to draw up a list of what you spend. You can use a spending diary, recent bank statements, or scroll through your banking app. Then look at what you have coming in, and where you can cut back to make the two balance better.”