Tenants face ‘three more years of soaring rents’

TENANTS face three more years of rising rents despite a cooling property market, analysis shows.

Rent is forecast to rise at almost double the rate of earnings between now and 2027, the Resolution Foundation has calculated.

It said that while the surging cost of new tenancies begins to slow down, existing renters yet to feel the brunt of rent rises will be hit hard by smaller wage growth, price increases by landlords and a shortfall in house building.

The think-tank said tenancies for new and existing lets are expected to grow 13pc over the next three years – almost double the 7.5pc growth in average earnings, as forecast by the Office for Budget Responsibility. The cost of rent for new tenants has risen by 18pc since January 2022, but this burst of growth is yet to work its way through the whole private rental sector.

Cara Pacitti, senior economist at the Resolution Foundation, said: “Millions of families agreeing new tenancies across Britain have faced surging 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.

“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.”

According to the Homelet Rental Index, the average rent in the UK is £1,273, a 33pc rise compared with pre-pandemic levels in February 2020.

The Resolution Foundation said the number of families renting has almost doubled since the late 1990s, from 11pc to 20pc, and a significant number of more people are renting after their 20s.

Ben Beadle, of the National Residential Landlords Association, said a continued shortage of rental homes is the key driver behind surging costs.

He said: “With demand far outstripping available supply, there are an average of 15 prospective tenants chasing every rented property, double the pre-pandemic level.”

A government spokesman said: “Our Renters (Reform) Bill will give people more security in their homes and empower them to challenge poor practices. Through our long-term plan for housing, we are investing £11.5bn in the Affordable Homes Programme and remain on track to build 1m over this Parliament.

“We are supporting people with rising costs with £108bn to help with bills – an average of £3,800 per household – and we have increased the Local Housing Allowance rate so private renters on housing benefit or universal credit are on average nearly £800 a year better off.”