Study reveals how rents in London have soared much higher than wage growth

Rents for a typical two bedroom flat in London have increased by almost 26% to £1,500 per month on average since 2011 and this high level is here to stay, new research suggests.

The rise in rents is much more than wage growth which has risen by 9.1% over the same period and it means that employers must be prepared to pay much higher wages to staff to enable them to afford these much higher rents, according to a new study by workers union the GMB.

The analysis of official data shows that between 2011 and 2017 rent prices for two bedroom flats in London increased by 25.9% while in England as a whole rent has increased by 18.2% with the average two bedroom flat costing £650 per month. Meanwhile wages increased by just 9.8%.

In London, Greenwich is the borough that has seen the biggest rise in rent. Between 2011 and 2017 rent of a two bedroom flat increased by 50%, to an average rent of £1,350 per month. Meanwhile, wages in the borough increased by just 7.2%.

Other London boroughs with a significant gap between pay rises and rent include Newham, where rent increased by 47.4% compared with wage growth of 9.5%, Barking and Dagenham where rent has increased by 42.4% compared with 16.4% for wages and Lewisham where rent has increased by 42.1% since 2011 and wages have increased by 16.8%.

The figures show increases in average rents for two bedroom flats of 30% or higher in 16 of the 33 London boroughs in the six years since 2011. In Greenwich rents went up by no less than 50% so that a two bedroom flat now absorbs about 70% of the average net pay of a resident in the borough.

‘These high rents are here to stay. So too are younger workers living for longer in private sector rental accommodation. As a direct consequence, employers must be prepared to pay much higher wages to staff to enable them to afford these much higher rents,’ said Warren Kenny, GMB regional secretary.

‘If employers don’t respond with higher pay they will face staff shortages as workers, especially younger people, are priced out of housing market. It makes little sense for these workers to spend a full week at work only to pay most of their earnings in rents. They will vote with their feet,’ he pointed out.

‘Policy mistakes have made the housing position for lower paid workers worse. Council homes for rents at reasonable levels were aimed at housing the families of workers in the lower pay grades and did it successfully for generations. These were sold off but crucially not replaced,’ Kenny explained.

‘There is a massive shortage of homes for rent at reasonable rents for workers in the lower pay grades. There is now no alternative to higher pay to pay these higher rents plus a step change upwards in building homes for rent at reasonable rents,’ he added.

The GMB believes that to make up for the current shortage of homes for rent at reasonable rents and to house a growing population is one of the most pressing challenges facing London. ‘Higher pay especially for younger workers is now one essential part of the solution,’ Kenny concluded.