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Tenants spending record high of 42% of income on rent

·Finance Reporter, Yahoo Finance UK
·3-min read
Private tenants spent a collective total of £62.4bn on rent last year. Photo: Toby Melville/Reuters
Private tenants spent a collective total of £62.4bn on rent last year. Photo: Toby Melville/Reuters

Record high rents are squeezing tenants, with the average household in the UK spending 42% of their post-tax income on rent, according to an index.

The Hamptons Monthly Lettings Index shows that record breaking rental growth last year meant that tenants spent an average £13,560 on rent, the equivalent of 42% of their income after taxes, the highest proportion since the index was launched in 2010.

Private tenants spent a collective total of £62.4bn on rent last year, up from £58.2bn in 2020.

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When utility bills such as gas, electricity, council tax, broadband and tv licences are taken into account, the average household spent 52% of their post-tax income on rent and bills last year.

Collectively, tenants paid a total of £77.8bn in rent and household bills last year, up from £73.4bn in 2020.

“Financial pressures are raining down on households, but while last year it was rental growth that ate into tenants’ incomes, this year it’s more likely to be energy costs,” Aneisha Beveridge, head of research at Hamptons, said.

“Rental growth is slowing as affordability pressures bite and we expect rents across Great Britain to end the year 2.5% up on 2021, down from 7% today. However, even if household incomes rise by the forecast 3.75%, it won’t be enough to fully offset rising utility bills and tenants, in particular, will feel the pinch,” she added.

These figures are set to surge in 2022 as the cost of living crisis deepens.

By the end of this year, Hamptons estimates that the average renting household will spend a record 54% of their post-tax income on rent and household bills, equating to an extra £4.6bn paid by tenants.

This will cost the average household an extra £1,008 each year with the total amount spent on rent and bills set to rise to £17,914 per household by the end of 2022 — up from £16,906 in 2021.

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“While we expect rental growth to slow to around 2.5% by the end of 2022, this will be offset by an increase in the energy cap and general price rises which could see tenants’ household bills rise by 15%, significantly outpacing earnings growth which is expected to increase to 3.75%,” the report said.

Regionally, tenants in the south of England have the smallest disposable incomes, compounded by strong rental growth since the start of COVID. The south east is the only region where rent makes up more than half (52%) of households’ post-tax income, with utility bills adding a further 12%.

The average privately rented household in the region spent £18,490 or 64% of their post-tax income on rent and bills in 2021, up from 59% in 2019. This could rise to 65% by the end of 2022.

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