London sees largest increase in rental affordability
While London remains the least affordable city for renters, the capital has seen the largest improvement in rental market affordability over the past five years, Benham and Reeves analysis of ONS data shows.
In London tenants spend 35% of their income on rent, however the cost of renting in the capital has fallen from £1,495 in 2017 to £1,450 in 2022, while typical incomes have increased from £2,975 to £4,155 per month over the same timespan.
As a result the current level of income required to cover the cost of renting has fallen from 50% in 2017 to the 35% required today.
Marc von Grundherr, director of Benham and Reeves, said: “Rental market affordability has long been a problem for the nation’s renters and while the percentage of income required to cover the cost of renting may have fallen across a number of regions, it certainly won’t feel like the challenge of renting has become any more affordable.
“Yes, an increase in earnings may have helped to an extent, but there are many who simply won’t have benefited from this increase. At the same time, the cost of renting has climbed across every region but one, putting further pressure on tenant finances.
“With the government doing its best to deter landlords from the sector, a reduction in the level of available rental stock will have also helped to drive up the cost of renting and this is an issue that doesn’t look like it will be easing any time soon.”
Across England as a whole 26% of tenant income is spent on rent, a proportion that has stayed unchanged since 2017.
It’s not just London that has seen a reduction in the level of income required to cover the average cost of renting.
In the East of England the proportion of income required to cover the average rent has reduced by -4%, as high incomes of £3,560 stood against typical rents of £865 per month.
Affordability also improved in Yorkshire and the Humber (-2%), the North West (-1%), South West (-1%), and East Midlands (-1%).
Tenant affordability has worsened in three regions, by 5% in the West Midlands, 4% in the South West, and 1% in the North West.
There’s likely been an influx of tenants moving to these regions in the past five years, shifting the balance of supply and demand.
It’s important to note that all these increases came from a low base.
Even after affordability became tougher for tenants, average incomes made up 29% of rents in the West Midlands, 29% in the South West and 26% in the North West – not far from the national average.