Rents in London are taking up a larger portion of tenants’ earnings again after three years of improvements.
Private renters on a median household income in the capital paid 41.6 per cent of their earnings on rent last year, up from 38 per cent in 2023 and the highest figure since 2021.
The cost of London’s housing pushed England’s affordability ratio above the 30 per cent affordability threshold in 2024, despite most English regions being below the figure, according to the Office for National Statistics.
The local authorities in the United Kingdom with the least “affordable” rents were all in London.
Megan Eighteen, president of ARLA Propertymark, put the decrease in affordability down to “rising mortgage rates, increased living costs, and stagnant wage growth”.
“It’s vital that we address the underlying causes of rising rents directly. Ongoing regulatory and financial pressures on landlords are driving many out of the market, especially when there is such a pressing need for housing, which is a key factor in the significant rent increases we’re seeing,” she added.
London faces a significant housing crisis, with around 66,000 new homes needed each year.
But planning approvals in the capital have fallen two per cent year-on-year, and only four boroughs have met or exceeded their housing targets laid out in the 2021 London Plan, which aimed for 52,000 homes.
“In London, the rents payable border on the obscene, and people’s earnings evaporate each month,” managing director at mortgage provider When The Bank Says No, Emma Jones, said.
“We should all spare a thought for the UK’s tenants. Many are in an impossible position, trying to save for a deposit while at the same time facing sky-high rents.”
Why is it so hard to build in London?
London has a target of building 88,000 homes a year to ease the crisis, although it’s not expected to come anywhere near that figure in the next few years.
The capital has suffered from early stumbling blocks in the Building Safety Regulator, which must sign off on any building over seven storeys or with more than one residential unit.
“If you are a developer and you’ve got a scheme of five to 800 homes, and you’ve taken a year to get planning… and it takes you another year to get building control sign off… interest charges will go up, the scheme becomes unviable, you lose your finance,” Mace chief Mark Reynolds said at a select committee meeting about the BSR.
There’s also a community Infrastructure Levy, Section 106 agreements and planning fees, plus still-high interest rates.
London is “by some accounts” the most expensive city in the world to build in, according to the GLA.
The Centre for London has found that the upfront cost of building 88,000 homes in the capital a year – the Government’s target – is about 43 times higher than the equivalent target in the West Midlands; the thinktank put the cost per year for London at £2.2bn.