Some of the recent surge in rental prices is therefore a post-pandemic ‘correction’, returning the UK’s rent-to-earnings ratio to its long-term trend, says a think tank Renters will see the amount spent on rent grow faster than their earnings are increasing in the years ahead, a think tank has warned, despite the surging cost of new tenancies cooling.
The main causes of Britain’s private rents surging, the Foundation says, is the market recovering from the pandemic and more recently fast-rising wages. It notes that rents tend to track wages over the long-term and that average private rents have remained roughly constant as a proportion of average earnings since 2000.
This is much faster than the 7.5 per cent growth in average earnings forecast by the Office for Budget Responsibility over those years.The number of families privately renting has almost doubled in a generation, from 11 per cent in the late 90s to nearly 20 per cent today.
But it said there is some good news on the horizon. Now the post-pandemic catch-up is completed while pay growth is cooling, the surge in rents for new tenancies should come to a close. New renters will pay these higher rents, while existing tenants reaching the end of a tenancy or forced to accept within-tenancy price rises, will in future face large rent hikes.
“With more families renting privately, and renting for longer too, these rent surges are a bigger problem for Britain, and require bolder solutions from policy makers. Short-term solutions include regular uprating of Local Housing Allowance to support poorer families, and the ultimate longer-term solution is to simply build more homes.”