Tenants are struggling to cope with rising rents and low wage growth, according to a new survey from flat and house share website SpareRoom.co.uk.
Rise and Fall
The website compared the absolute maximum a tenant indicated that they could spend on accommodation, against average room rental prices. Results show that average UK rents have risen by 10% since 2009. Worryingly, it was found that during the same period, tenants’ budgets fell by 0.5%, with many struggling with an increased cost of living and minimal growth in wages.[1]
In London, rents have risen by 26% during the last five years, with budgets increasing by just 10%. Scotland was worst affected, with rents rising by 24% but budgets dropping by an alarming 22%.[1]
The slowest rental increases in the UK were found in Northern Ireland at 10%, although tenants’ budgets for their rental accommodation dropped by 5%.[1]
Least affordable
Taking figures accrued from the past year into account, Scotland and London have become the least affordable places to rent. Rents within Scotland have risen by almost 10% in the last 12 months, with budgets only increasing by 5.1%. Rents in London have increased by 5.1%, with budgets rising by just 3%.[1]
The data from the last 12 months suggests that Wales is the most affordable country in the UK, with rent rises around 1.7% and budget increases at 4%.[1]
Scarce
The Office of National Statistics said that weekly earnings are rising by just 1.7% per year, but average rent prices increased by 5% between 2013 and 2014. Statistics also indicate that the average rent of a room in the UK works out at around 31% of the take home pay of an employee working full-time.[1]
Director of SpareRoom.co.uk Matt Hutchinson, suggests: “Affordable rents are becoming ever more scarce,” and “many people are still struggling with the cost of living.” Hutchinson alludes to the fact that “this isn’t being helped by the fact the wage growth is the lowest since records began.”[1]
Mr Hutchinson went on to say: “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.”
He believes: “The only obvious short-term solution is to encourage more homeowners to let their spare bedrooms and create supply.”[1]
Hutchinson indicates that the solution to the problem is to raise the Rent a Room Scheme tax-free threshold. He says that this threshold “hasn’t been increased since 1997 and rents have risen by 103% in that time.” Hutchinson believes that this will not only benefit renters; “it could stop thousands of homeowners slipping into arrears when interest rates finally rise.”[1]
[1] http://www.landlordtoday.co.uk/news_features/Tenants-struggle-as-rents-rise-faster-than-incomes