Tenants budgets squeezed as rents rise faster than incomes

by Property 118

13:25 PM, 21st August 2014
About 4 years ago

Tenants budgets squeezed as rents rise faster than incomes

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Tenants budgets squeezed as rents rise faster than incomes

Tenants budgets feel the pinch in their accommodation costs as rents are rising faster than incomes.

Affordable accommodation in the private rental sector is becoming ever more scarce, according to new data from flat and house share website SpareRoom.co.uk, which compares the maximum tenants can afford to spend on accommodation to average room rents.

UK rents have risen by 10% since 2009, but in the same period tenants’ budgets haven’t risen at all. In fact, they’ve fallen by 0.5%, as renters struggle with historically low wage growth and the often high cost of living.

In London, where room rents have soared by 26% in the past five years, budgets have increased by a mere 10% and in Scotland, where rents have increased by 24%, budgets have fallen a staggering 22%.

Northern Ireland has seen the slowest rental increases over the past five years (10%), yet tenants’ budgets for accommodation have dropped 5%.

  • Since 2009, UK rents have risen by 10% while tenants’ accommodation budgets have fallen by 0.5%
  • London room rents have soared by more than a quarter (26%) in the past five years – more than twice as fast as budgets, which have increased by just 10%
  • In Scotland, flatsharers’ budgets have plummeted by more than a fifth (22%) since 2009, while rents have increased by almost a quarter (24%)
  • Average earnings are only rising by 1.7% per year1 yet average rents are rising by 5% annually

The table below shows the change in monthly rents between 2009 and 2014:

Ave Rent 2009 (£)

Ave Rent 2014 (£)

Rental Increase %

London & suburbs

£549

£691

25.8%

East Anglia

£345

£398

15.4%

East Midlands

£314

£353

12.6%

North England

£304

£334

9.8%

North West England

£316

£359

13.8%

South East England

£390

£449

15.2%

South West England

£347

£394

13.7%

West Midlands

£334

£366

9.7%

Yorkshire & Humberside

£312

£347

11.3%

Northern Ireland

£238

£260

9.5%

Scotland

£325

£403

24.2%

Wales

£302

£332

9.9%

UK

£500

£550

10%

The table below shows the change in tenants’ monthly budgets between 2009 and 2014:

Ave Budget 2009 (£)

Ave Budget 2014 (£)

% Change In Budget

London & suburbs

£574

£633

10.4

East Anglia

£410

£433

5.7

East Midlands

£363

£369

1.5

North England

£361

£379

4.9

North West England

£385

£402

4.5

South East England

£445

£463

4

South West England

£414

£421

1.8

West Midlands

£392

£392

0.2

Yorkshire & Humberside

£457

£381

-16.5

Northern Ireland

£306

£290

-5.2

Scotland

£536

£420

-21.8

Wales

£340

£372

9.2

UK

£415

£413

-0.5

Over the past year, Scotland and London have become the least affordable. Rents in Scotland have risen by 9.9% in the past 12 months, twice as fast as budgets (5.1%). In London, rents have increased by 5.1% while budgets have only increased by 3%. Based on the last 12 months, Wales is the most affordable – as budget increases, at 4%, are more than twice rent rises (1.7%).

According to the ONS, average weekly earning are rising by a meagre 1.7% per year, yet average rents rose by 5% between 2013 and 2014.

The average monthly UK room rent is currently £550 31% of the average take home pay of a full-time employee.

Matt Hutchinson, director of SpareRoom.co.uk, said “what’s clear is that affordable rents are becoming ever more scarce. Many people are still struggling with the cost of living and this isn’t being helped by the fact that wage growth is the lowest since records began.

“The problem is we have a chronic shortage of housing in the areas where jobs are being created, so rents continue to rise as supply fails to meet demand. In some areas of the capital we’re seeing up to 13 people compete for every room advertised.

“The only obvious short-term solution is to encourage more homeowners to let their spare bedrooms and create supply. To do that, the Rent A Room Scheme tax-free threshold needs to be raised to act as a proper incentive. It hasn’t been increased since 1997 and rents have risen by 103% in that time. Not only will this benefit renters, it could stop thousands of homeowners slipping into arrears when interest rates finally rise.”

SpareRoom is currently campaigning for the Rent A Room Scheme threshold, which hasn’t been changed since 1997, to be raised to £7,500 per annum.tenants budget

 



Comments

Neil Patterson

13:55 PM, 21st August 2014
About 4 years ago

This also illustrates why I do not believe there is sufficient inflationary pressure from domestic demand and wages to warranty any short term interest rate rise by the Bank of England.

Michael Barnes

14:31 PM, 21st August 2014
About 4 years ago

Lots of numbers, but what is the definition of "tenants' budgets"?

If it is what tenants want to spend on rent, then it is fairly meaningless.
If it is what tenants have available to spend on rent, then it is a bit more meaningful.

Mandy Thomson

14:32 PM, 21st August 2014
About 4 years ago

Reply to the comment left by "Neil Patterson" at "21/08/2014 - 13:55":

Absolutely - we're already seeing a cooling of the housing market caused by the introduction of MMR. It doesn't take much imagination to see what raising the interest rate would do, both to the housing market and the wider economy.


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