Tenants see rent affordability hit the worst level in 10 years

Tenants see rent affordability hit the worst level in 10 years

0:02 AM, 14th September 2023, About 9 months ago

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Renters in the UK are facing the highest level of rental affordability in a decade as demand for rented homes outstrips supply across the country, Zoopla reveals.

The property platform has published its latest Rental Market Report and found that renters need to spend 28.4% of their gross earnings to cover the average rent.

That’s up from an average of 27.2% over the past 10 years.

The report also reveals that rents have risen by 10.5% in the past year, adding £1,320 to the annual rent bill for the average renter – or £110 per month.

The platform also says that over the last three years, rents have increased by £2,772 per year, putting more pressure on renters’ budgets.

‘Endless cycle of low supply and strong demand’

Richard Donnell, Zoopla’s executive director, said: “The rented sector is stuck in a seemingly endless cycle of low supply and strong demand which has kept rental growth in double digits for 18 months in a row.

“Scotland is the hottest rental market with rents up almost 13% over the last year as landlords adapt to new rent controls over the last year.”

He added: “Rents continue to rise faster than earnings, worsening rental affordability for renters looking to move.

“Rents are set to rise 9% over 2023 with the pace of rental growth being shaped more by the affordability of renting, and how renters adapt to higher rents, than major shifts in supply or demand.

“More renters looking to share accommodation could well support rental growth into 2024 with no end in sight for the shortage of homes for rent.”

‘Renters are resorting to renting smaller homes’

Zoopla’s report also highlights that many renters are resorting to renting smaller homes, moving to cheaper areas or sharing with other renters to reduce costs.

This is backed up by data from the Resolution Foundation which shows that private renters have experienced a 16% reduction in floor space per person over the last 20 years.

The main driver of the rental affordability crisis is the lack of supply of rented homes, which is 30% below the average for this time of year.

However, Zoopla says that demand for rented homes is 51% above the five-year average – but this is still 20% lower than a year ago.

Scotland has the fastest rent growth

The report highlights that Scotland has the fastest rent growth as rents have soared by 12.7% in the past year.

This is partly due to the introduction of rent controls in September 2022, which have capped rent increases for existing tenancies at 3% a year.

However, landlords can reset the rent to the full market rate when a property becomes vacant, so they look to maximise the rent for new tenancies to cover increased costs and future rent caps.

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