An annual report into rental affordability has revealed that tenants were paying a lower percentage of their salaries in rent during 2021 than the year before.
The latest rental affordability index from BTL mortgage broker Paragon covering 2021 reveals that across England people on the national average salary of £30,264 paid 32.1% of their wage to a private landlord.
But the firm’s previous report for 2020 shows that a tenant earning the national average wage was paying 32.8% of their salary or a reduction of nearly 1%.
While this is not a seismic shift in renting costs, it highlights how claims by some campaigners that rent affordability has been ‘out of control’ are wide of the mark.
Improving since 2013
The Paragon data also echoes the official ONS statistics which shows that affordability has been improving in recent years as salary increases have outpaced weak rent rises.
The most recent ONS report says: “For most regions, private rental prices have become slightly more affordable since 2013, as the proportion of income required to rent in 2020 was less than in 2013.”
But campaigning groups such as Shelter and Generation Rent are correct on two aspects of rent increases within the PRS.
One is that affordability in London and the South of England has reached worrying levels. The Paragon report says someone earning the average wage of £36,326 in London will pay 50.2% of their post-tax salary on rent, and 36.1% if they live in the South East.
And the current crisis in the PRS, which has seen landlords exiting the market as tax breaks have been withdrawn in recent years while on the other hand unaffordable ‘for sale’ properties have grown the tenant population, have spurred on large increases in recent months, adding to the cost of living crisis.
The ONS recent revealed that the average rent for a tenancy in England is £755, recorded between October 2020 and September 2021, the highest ever recorded.
“The lower purchase prices for homes in regions such as Yorkshire and The Humber means that investors can keep rent prices relatively low while still covering their overheads,” says Richard Rowntree (pictured), MD Of Paragon Bank.
“It’s important to acknowledge, however, that there is a limit to this, and the current economic conditions mean that it is becoming more expensive to manage a lettings business. Alongside supply of properties that is exceeded by demand, this is placing pressure on rents.”
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