Stay updated with complimentary news alerts
Sign up for the UK property myFT Digest to receive updates straight to your email.
Rental affordability in the UK has reached its lowest point in over seven years, with tenants now spending almost 30 percent of their incomes on housing, based on recent data.
According to figures from property data company PriceHubble, published by the Office for National Statistics this week, rent on new tenancies accounted for 28.8 percent of renters’ gross income in July.
The statistics agency considers rent as “unaffordable” if it exceeds 30 percent of income. Rent as a percentage of wages has increased by 2.2 percentage points over the past year, reaching its highest level since at least 2017.
“This clearly indicates a significant affordability issue in the UK,” stated Sandra Jones, managing director at PriceHubble, which collects data from the financial checks conducted by landlords on new tenants.
The worsening affordability situation will further intensify the pressure on the Labour government to address the crisis in the UK rental market, which is grappling with a shortage of supply and record rent hikes.
The ONS reported this week that average private rents in the UK rose by 8.6 percent in the 12 months leading up to July, remaining steady from June and close to the record 9.2 percent annual increase seen in March.
“Rents are continuing to outpace wage growth,” noted Robert Wood, economist at consultancy Pantheon Macroeconomics.
The ONS revealed on Tuesday that wage growth slowed to a nearly two-year low of 5.4 percent in the three months leading up to June.
Rental affordability is expected to be even more challenging for individuals with lower incomes and in certain regions of the country. In July, rent represented 31.7 percent of incomes in London, according to the data.
Jones pointed to “several factors” contributing to the pressures in the rental market, including regulatory changes, landlords divesting their properties, and an increasing number of people seeking an extra bedroom for remote work.
Despite the affordability constraints, she mentioned that institutional investors remain eager to provide rental housing at scale across all market segments.
To avoid discouraging investment in new housing, the government has ruled out implementing rent controls to alleviate the crisis.
The Ministry of Housing, Communities and Local Government stated: “This government has no plans whatsoever to devolve rent control powers. Lack of supply is exacerbating the housing crisis.”
The government has committed to boosting home construction and implementing regulations to curb bidding wars, halt “unreasonable” rent increases for existing tenants, and end Section 21 “no fault evictions” — a measure promised by the previous Conservative government.
Sadiq Khan, the Labour mayor of London, has consistently urged the government to empower him with the authority to impose rent controls in the capital, where rent has already surpassed the official affordability threshold.
A paper released this week by the Institute of Economic Affairs, a free-market think tank, argued that the detrimental effects of rent control outweigh the benefits to tenants.
“The consensus in economic research is that rent controls diminish the supply and quality of rental housing, impede housing construction, reduce mobility among private tenants, and result in a misallocation of the existing rental housing stock,” stated Kristian Niemietz, IEA editorial director.
Ben Twomey, chief executive of the advocacy group Generation Rent, advocated for “a fair and sensible approach” that would prevent rents from rising faster than wages or inflation.