It will take the average Londoner until 16th June to earn enough before tax to cover their annual rent bill. The only way to bring prices down is to build more houses, says Sam Bidwell
On average, for the first 125 days of 2024, English renters worked solely to pay their landlord.
That’s according to new research from the Adam Smith Institute, which calculated this year’s ‘Cost of Rent Day’ as 5th May – that’s the day on which, on average, renters in England earn enough before tax to cover their annual rent bill. For Londoners, that day is still yet to roll around. Renters in the capital will need to wait until 16th June, more than a month later than the national average, before their housing costs for the year are covered. Again, that’s before tax – account for that, and the picture looks even bleaker.
For young people, this mounting rent burden is fast becoming a political priority; For this group, more money spent on rent means less money saved for the long term, and a greater sense of financial precarity. Many talented young professionals are being priced out of London altogether, forced into long commutes from dormitory towns in the south-east.
For the City, this poses an existential challenge; if the higher salaries on offer in London’s financial services sector are still not enough to offset the city’s stratospheric rental costs, we can expect to see fewer talented UK graduates in City jobs.
Despite the insistence of some commentators on the left, the solution is not to impose arbitrary rent controls. Everywhere they have been tried, rent controls have categorically failed to reduce rent prices. In fact, wherever rent controls have been tried, the quality and quantity of properties on offer to renters has declined. As tempting as it might be to launch into a spirited defence of Chairman Mao when it’s time to cough up the month’s rent, landlordism is not to blame for our current predicament.
In fact, the problem is quite simple. The root of Britain’s housing crisis is lack of supply. At a time when our population is increasing, largely due to immigration, the number of new houses being built has stagnated, falling well below the Government’s annual target of 300,000. At the start of 2023, the UK recorded a shortfall of 4.3m homes. When too many people compete over too few resources, the price of those resources increases. The result is increasing property prices and, in turn, increasing rental costs.
Just as the problem is found in the simple principle of supply and demand, so is the solution. The UK, and London in particular, needs to build more homes in the places that young people want to live. A generation burdened by excessive rental costs will finally be liberated, giving them the economic freedom to cobble together a mortgage deposit, save for the future, and start a family.
The economic case is simple – the political case is trickier. Nimby councils across the UK work tirelessly to protect the vested interests of existing asset owners, while cumbersome planning regulations make it more difficult and more expensive for developers to deliver much needed-housing supply. Politicians of all parties are guilty of equivocating on this issue, hiding behind managerialist clichés about ‘sympathetic development’ and ‘giving regard to the interests of residents’.
Yet, get this right, and there is an enormous political opportunity waiting to be seized. Whoever is able to deliver enough homes to bring down rent, detoxifying the first rung of the housing ladder for young people, can win the hearts, minds, and political support of the next generation. Politicians wanting to win over young voters in their millions should remember that famous SAS motto – who dares wins.
Sam Bidwell is director of the Next Generation Centre at the Adam Smith Institute