Average rents could increase by 13% over the next three years, the Resolution Foundation forecasts
Rents across the UK could continue to rise strongly and surpass earning growth over the years ahead, says a think tank.
Average rents could increase by 13% over the next three years, the Resolution Foundation forecasts.
The typical cost of new tenancies has already grown by 18% since January 2022, with private renting no longer being the preserve of people aged in their 20s, per the Foundation.
It said a rebound from the pandemic, during which evictions and repossessions were halted, and recent wage growth have helped rental prices to soar.
Some of the recent jump in rental prices is a post-pandemic “correction”, the Foundation argued.
While the catch-up is now complete and pay growth is cooling, it could take years for the burst of growth already seen to make its way through the whole private rental sector, the Foundation warned.
It said: New renters will pay these new higher rents, while existing tenants reaching the end of a tenancy or compelled to accept within-tenancy price rises will in future face large rent hikes.
If it is assumed that average rents paid will return to their pre-pandemic level compared to earnings in three years’ time, then rents would typically see more than 13% price growth over that period – surpassing the 7.5% earnings growth expected during that time, the report added.
Cara Pacitti, senior economist at the Resolution Foundation, commented: Millions of families agreeing new tenancies across Britain have faced soaring rents in recent years as we have emerged from the pandemic.
Those rises for new tenancies are starting to slow, but how much renters actually pay will continue to outgrow how much they earn for some years to come as those not yet exposed to higher prices are hit, Pacitti said. With more families renting privately, and renting for longer too, these rent surges are a bigger problem for Britain and require bolder solutions from policymakers.
Pacitti added: Short-term solutions include regular uprating of Local Housing Allowance to support poorer families, and the ultimate longer-term solution is to simply build more homes.
