The average price of rent is projected to rise by 13% over the next three years, a living standards think tank reveals.
In UK properties, rent prices have grown by almost a fifth since January 2022, when the average prices plunged during the Covid-19 pandemic.
The impact of evictions and repossessions being paused during that period led to prices falling, according to Resolution Foundation’s report Through the Roof: Recent trends in rental price growth. Further, rent levels dropped to their lowest recorded level relative to tenants’ earnings in 2022.
This projection is due to the rate of earnings forecasted to crawl by 7.5% in total over three years. Whereas, rent is expected to increase by 4.2% on average in every year leading to 2027, as predicted by the Office for Budget Responsibility (OBR).
It will go against the trend where rent has matched the proportion of wage growth since 2000.
Number of family renters doubles
Meanwhile, the number of families renting privately has also doubled since the late 1990s, with almost 20% of families doing so compared to 11% a generation ago. And the demographic of renters is changing too. The proportion of poorer families with parents aged between 30 and 49 years old tripled from 11% to almost a third.
The reasons for rising rents are also not necessarily about rising mortgage rates either, but more of the market ‘correcting itself’, the report indicates.
While rents rise, the rate of growth is steadying, dipping from a 10.4% growth in June 2023 to 7.5% in March 2024. Indeed, the monthly cost of owning a first home is more expensive than the cost of renting in nine out of 12 UK regions in 2023.
However, despite this growth easing, Cara Pacitti, senior economist at the Resolution Foundation, has warned renters still face hikes.
Rent growth is slowing but costs remain high
Pacitti 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.”
The economist says more support from the Government needs to happen for families to afford housing costs.
She added: “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.”
