According to research carried out by the Local Government Association (LGA), one in seven private renters are having to spend more than half of their total income on rent, this being in stark contrast to homeowners, where only 2% pay more than half of their income on their mortgage.
Further figures from the LGA suggest that the average deposit for a property now costs up to 71% of a first time buyer’s annual income and that under 25 year olds today are now half as likely to be homeowners than 20 years ago. Consequently, in addition to being burdened with finding an affordable home to live in as a result of inflated rent, young adult renters are hindered most from saving up an adequate sum to put down as a deposit for a home of their own.
Last year, only 30,000 new affordable homes were built in the country – the lowest number in 24 years. This has prompted the LGA to call upon the Government to fund, and in turn, enable councils, to build a new wave of affordable homes and social rents to reflect the actual affordability of families and young adults.
Councillor Judith Blake, LGA housing spokesman, said: “When one in seven private renters are spending half of their income on rent, it’s no wonder we have a rental logjam – with a shortage of homes with genuinely affordable rent, and young people struggling to have enough income left over to save for a deposit.
“A thriving private rented sector helps create a balanced mix of available housing. A new wave of genuinely affordable homes for rental, that costs 30% of household income or less, would provide tenants with stability, reduce the squeeze on household incomes and help more people get on the housing ladder.”
Relationship between rent and income
Findings revealed from research carried out by the Chartered Institute of Housing (CIH) revealed that while wages across England increased by 10% from May 2011 to May 2017, rents grew by a significant average of 14.6% over the same period.
Terrie Alafat, chief executive of the CIH, said: “This analysis reveals just how stark growth in private rents is in London and the south-east, where it is clear there is now a significant gap between the amount people earn and the cost of their housing.”
Good news on the horizon?
However, various rental index figures show that there has been some relief, albeit mild, for some tenants in some parts of the country as private rents in London and the south-east appear to have fallen over the past year. Moreover, following the announcement of the Tenants’ Fees Bill in the Queen’s speech this year, tenants will soon benefit from no longer having to pay the fees imposed by letting agents. The security deposit will also be capped at no more than one month’s rent.
Conversely, when the bill enforcing the ban on letting agent fees becomes law, there may be a risk of rents rising with landlords using this as a means to mitigate such expenses.
David Cox, the Chief executive of ARLA Property mark voiced the same opinion as he said: “A ban on letting agent fees will cost the sector jobs, make buy-to-let investment even less attractive, and ultimately result in the costs being passed on to tenants.”
The Association of Residential Letting Agents similarly forecasted that rents may surge further in the coming months by £103.00 per year to compensate for the loss of letting fees. It was also revealed by the aforementioned association that only 2.8% of tenants had managed to negotiate a rent reduction last month.
Similar to the suggestion put forward by the LGA, an increase of all types of housing – particularly houses for affordable or social rent – will potentially assist in solving the housing shortage and accordingly a resurgence in house building by councils is ultimately essential if we are to boost affordability.