London tenants spend 37.7% of income on rent
Tenants in the capital spend an eye-watering 37.7% of average income on rent, according to new figures from the Office for National Statistics.
This is unsurprisingly much higher than the England average of 23% of income.
In fact, rents are so high in London that only a household in the higher income quartile would be able to rent a property in the capital without spending more than 30% of their income on rent.
At the other end of the spectrum, the East Midlands and North West are the most affordable rental regions for lower income households living in the region.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “In 2020, on average, we spent just under a quarter of our income on rent. However, the averages only tell a small part of the story. In reality, an awful lot of renters faced an uphill struggle, which has become even harder in the interim.
“There are massive regional differences, and despite rent cuts during the pandemic, renting in London is still eye-wateringly expensive. In the capital only the 25% richest people could describe rental as affordable (where rent makes up 30% or less of your income).
“It means that for all but the best off in the capital, rents are ruinous.”
Has renting become more affordable?
For most regions, private rental prices look to have become slightly more affordable since 2013, as the proportion of income required to rent in 2020 was less than in 2013. This indicates that average incomes have risen further than rental prices, said the ONS.
Plus the 23% of income required to pay rent in 2020 is down from 26.3% in 2016.
But Coles cautioned: “Elsewhere in the country, you need to be careful about averages. During the pandemic, a rise in the average wage was the result of more people on lower incomes losing work, so a rising average wage wasn’t a sign that everyone was getting richer: in fact it was the result of those on low wages losing work and becoming poorer.
“Similarly, higher rises at the top end of the wage spectrum can distort the average, which is why the statisticians also looked at whether people on the lowest 25% of incomes could afford the lowest 25% of rents. That’s when they found that the East Midlands and the North West are the only regions in England where people on the lowest incomes could afford the cheapest rents.
“It doesn’t take average rents to rise to push your rental costs up significantly. More hybrid working and working from home means people need more space, so your costs can rise even if local rents overall don’t.
“This is why it’s especially important for renters to keep on top of their spending.”