RENTS could continue to rise strongly and outpace earning growth over the years ahead, the Resolution Foundation predicted today in a damning indictment of the housing crisis.
Average rents could rise by 13 per cent over the next three years as high market rates work their way through existing tenancies, the think tank warned.
The cost of new tenancies has already grown by 18 per cent since January 2022, with private renting no longer being the preserve of people aged in their 20s, the foundation said.
It said a bounce-back from the pandemic, during which evictions and repossessions were halted, and recent wage growth have helped rental prices to surge.
Some of the recent surge in rental prices is a post-pandemic “correction,” the foundation said.
This post-pandemic catch-up has been compounded by earnings growth, with average earnings rising by 13 per cent since the start of 2022.
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 said.
“New renters will pay these new higher rent, while existing tenants reaching the end of a tenancy or forced to accept within-tenancy price rises will in future face large rent hikes,” it said.
If average rent costs return to their pre-pandemic level compared with earnings in three years, then rents would see more than 13 per cent price growth over that period, outpacing the 7.5 per cent earnings growth expected during that time, the report said.
Resolution Foundation senior economist Cara 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.
“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.”
Generation Rent chief executive Ben Twomey said: “Renters have nowhere to hide from the housing crisis.
“As well as building more homes and giving enough support through the benefit system, the government needs to stop landlords raising rent beyond what we as tenants can actually afford.”
A government spokesperson said that its much-delayed Renters (Reform) Bill will give people “more security in their homes and empower them to challenge poor practices.”
