AUGUST 22, 2014 | BY A & S Property
Tenants struggle as rents rise faster than incomes
Affordable accommodation in the private rental sector is becoming ever more scarce, according to data from flat and house share website SpareRoom.co.uk.
The site compares the maximum tenants can afford to spend on accommodation with average room rents.
SpareRoom’s data reveals that average UK rents have risen by 10% since 2009 but – in the same five-year 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 more than a quarter (26%) in the past five years, budgets have increased by a mere 10%. And in Scotland, where rents have increased by 24%, budgets have plummeted 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%.
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 earnings 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 – almost a third (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.”
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