The rental market in the United Kingdom is currently facing a significant crisis, with affordability reaching its lowest level in over seven years. Data from property company PriceHubble, published by the Office for National Statistics (ONS), indicates that tenants are now dedicating nearly 30% of their incomes to housing costs. As of July, rent on new tenancies consumed 28.8% of renters’ gross income, reflecting a 2.2 percentage point increase from the previous year. This marks the highest level of rent affordability issues since at least 2017, according to the available data. The ONS categorizes rent as “unaffordable” when it exceeds 30% of a person’s income.
Sandra Jones, managing director at PriceHubble, highlighted the seriousness of the situation, stating, “This is proof if you need it that we have a problem with affordability in the UK.” The deteriorating affordability is anticipated to increase pressure on the Labour government to take action regarding the rental market crisis, which is characterized by a shortage of housing supply and record-high rent increases.
The ONS reported that average private rents in the UK rose by 8.6% in the 12 months leading up to July, maintaining the same rate as June and remaining close to the record 9.2% annual increase observed in March. Robert Wood, an economist at Pantheon Macroeconomics, pointed out that “Rents continue to outstrip pay growth,” as wage growth slowed to a near two-year low of 5.4% in the three months ending in June.
Rental affordability is expected to be particularly challenging for lower-income individuals and in specific regions, with London seeing rent accounting for 31.7% of incomes in July. Despite these affordability challenges, Jones noted that institutional investors are still “keen to deliver rental housing at scale, for all segments of the market.”
The government has decided against implementing rent controls to alleviate the crisis, partly to avoid discouraging investment in new housing. Instead, the administration has committed to increasing home building and introducing regulations aimed at preventing bidding wars, curbing “unreasonable” rent increases for existing tenants, and halting Section 21 “no fault evictions.”
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