Rents across the country are likely to continue to rise over the coming years, outpacing any growth in earnings, according to figures out from a leading think tank.
The analysis from the Resolution Foundation warns that rents could rise by as much as 13 per cent in the next three years, even though the average cost of new rental agreements has already grown by 18 per cent since the start of 2022.
The market rallied as the country recovered from the coronavirus pandemic, when evictions and repossessions were outlawed. It was then further boosted by consecutive years of rising wages, up an average of 13 per cent since January 2022.
Rents have adjusted to reflect these two factors, according to the study, and are now close to their pre-pandemic high relative to income. But even though this catch-up is complete, and wage inflation has cooled, it will be years before the effects of this reset are felt throughout the entire private rental sector.
Earlier this year, London rents hit a record high, prompting warnings the market had hit its “affordability ceiling”.
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.
“With more families renting privately, and renting for longer, these rent surges are a bigger problem for Britain and require bolder solutions from policymakers.”
Ben Beadle, CEO of the National Residential Landlords Association, said: “Whilst wage growth plays a role [in rising rents]. a key driver is the balance between supply and demand.
“Ultimately, a healthy rental market is one in which there is a supply of rented housing to meet ever growing demand. Ministers need to act to support the sector.
The findings come as the government pushes through its Renters Reform Bill, which seeks to bolster tenants’ rights.
However, questions remain over whether the Bill will be ratified before a general election, after reports revealed it had been “put back indefinitely” due to Tory backbenchers’ unease at the some of its provisions.