New research from the Resolution Foundation suggests that the average rent in the UK could soar by 13% over the next three years, driven by surging market rates that are gradually permeating through existing tenancies. The study reveals that the cost of new tenancies has surged by a staggering 18% since January 2022, significantly impacting families’ living standards. This surge has notably influenced the dynamics of private renting, with the number of families relying on private rental accommodation nearly doubling in a generation, from 11% in the late 1990s to nearly 20% today.
Moreover, the data indicates a notable shift in the demographics of private renters, with a substantial increase observed among poorer families headed by individuals aged 30-49. The proportion of such families renting has nearly tripled from just 11% in the mid-1990s to nearly 30% in 2021-22. Contrary to popular beliefs, the surge in rental prices is not solely attributed to rising interest rates impacting Buy-to-Let mortgages or a mass exodus of landlords from the Private Rental Sector (PRS) due to tougher regulations.
Instead, the Foundation points to the rebound from the pandemic and fast-rising wages as primary drivers behind the rent surge. Rental prices typically track wage growth over the long term, and with average earnings rising by 13% since the beginning of 2022, this has further fueled the escalation in rental costs. While the surge in rents for new tenancies is showing signs of moderation, it could take years for this growth to cascade through the entire private rental sector.
Looking ahead, the forecasted rental price growth remains substantial, with estimates suggesting a 13% increase in average rents over the next three years, outpacing the growth in average earnings. As such, policymakers are urged to implement bold solutions to address the challenges posed by surging rents, including regular uprating of Local Housing Allowance to support poorer families and prioritising the construction of new homes to alleviate the housing shortage. In the face of these ongoing challenges, proactive measures are essential to ensure housing affordability and stability for renters across the UK.
