According to Countrywide’s Monthly Lettings Index for May, the average cost of renting a one-bedroom home in Great Britain accounts for 48% of the post-tax income of an average young full-time worker. This compares to 45% in 2007. Rents have increased 27% since 2007 outpacing a 16% growth in incomes.
In most parts of the country, the proportion of income taken up by rent is less now than it was in 2007. In the North East, the cost of a one-bedroom home accounts for 35% of the post-tax income of an average full-time worker under 30, much lower than the 42% in 2007. Tenants in the North East have benefited from the highest regional income growth since 2007 (32%), in addition to rents being only 11% higher than they were in 2007.
It’s a very different story in the capital however. The cost of renting a one-bed home in London now takes up 57% of the post-tax income of an average full-time worker aged under 30. This is a 16% increase on the 41% of income in 2007. Rents have risen by 48% since 2007 more than four times as fast as the 11% increase in incomes and this has put tenants in London under increasing affordability pressure.
As affordability pressures have increased in some regions, tenants have opted to reduce the burden by sharing. Since 2007, the proportion of one-person households in the private rented sector has decreased by 3%, while four and five people households have grown by 2% & 1% respectively. Similarly, the proportion of homes with a spare room in the sector has fallen by 3% in the same period, suggesting that for many a spare room has become an unaffordable luxury.
Overall, average rents in the UK rose to £945 in May, 2% higher than they were last year. The pace of growth remains low compared to last year, when rents were growing at a rate of 5.5%. Scotland and the North saw the highest year-on-year increase in rent, 12% and 4% respectively.
Commenting on the findings, Johnny Morris, Research Director at Countrywide, said:
“In most parts of Great Britain, rising incomes have softened the impact of increasing rents. For more than half of the country, rents now take up less of the average person’s take-home pay than before the downturn in 2007.
“But in London rents have risen much faster than wages, stretching affordability. Many tenants have adapted to rising prices by either moving to cheaper areas, further from the centre, or sharing. Stalling rental growth in the capital begs the question whether London’s rents have reached their affordability limits for now”.