Have rents in England hit their ceiling?

The Adam Smith Institute think tank has calculated this year’s “Cost of Rent Day” in England as falling on 5 May – meaning that tenants are effectively working the first 125 days of the year just to pay their landlords.

Their calculation compared pre-tax salaries to local average rents, finding that renters in cities and the South East have their Cost of Rent Days at later dates, despite their higher average incomes. But encouragingly for tenants, this day fell earlier in 2024 than it did in 2022 or 2023.

How sustainable is this for tenants?

The think tank’s point isn’t to criticise landlords. Its report argues that the private rented sector provides much-needed housing and stimulates local economies. And their policy recommendations are also quite landlord-friendly: fewer planning restrictions, more house-building, and no rent controls.

Instead, it wants to focus attention on affordability. Elsewhere, there are signs that rental growth is slowing as tenants run out of financial breathing space. Zoopla’s April report on average rents found that growth is falling, and predicted it will drop further this year. Year-on-year rental growth in Scotland fell below 10% for the first time since May 2022 despite the end of the country’s rent control regime, and growth has been slowest in London and the South East, where rents are most expensive.

Even so, rents are expected to rise faster than wages in the medium term. And the Adam Smith Institute report suggests that there could be room for them to go up significantly in many markets. In most London boroughs, as well as other cities like Bristol, Brighton and Oxford, average rents take up more than half of average income – well above the national average.

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