London rental crisis: Average Londoner now spends 40% of income on rent

New data shows average rental costs in London are up 13.5% in the last 12 months, as the mayor repeats his call for rent regulation in the capital.

In its latest quarterly Rental Market Report, based on data up to April 2023, property company Zoopla found rent as a percentage of gross earnings across the UK was at its highest point in a decade.

In London, renters see an average of 40% of their gross earnings go straight on their home, just short of the 43% recorded in 2015.

The report described how, across the county, rental inflation is at double digits for the 15th consecutive month, with rents growing faster than average earnings for almost two years.

Concerningly, Zoopla says it does not expect the supply of rental properties to improve enough to effectively moderate prices in 2023, with the level of homes for rent remaining around 20-40% below pre-pandemic levels in most regions.

In the capital, the report found there was a 26% reduction in available properties when looking at the four weeks to June 11, compared with the five-year average.

However, it does anticipate affordability and demand-side factors to have some impact on rent inflation, slowing it towards 8% by the end of this year, against the 10.4% reported for April.

Among the UK’s regions, London has been hit by the highest year-on-year inflation, 13.5%, bringing the average rent in the capital to £2,001.

This rise is below the 16.6% reported for the 12 months to April 2022, which itself was the highest in England and Wales by some distance.

Richard Donnell, executive director at Zoopla, said: “Renters continue to face a relentless increase in rents, compounding wider cost of living pressures and making home moving decisions ever more challenging, especially for singles and those on lower incomes.

“The chronic imbalance between supply and demand continues to push rents higher but we expect increasingly stretched affordability will start to reduce the pace of rental growth into 2024.

“While there is concern over the impact of higher mortgage rates on those with mortgages, renters have already seen a £2,820 a year increase in rental costs over the last 5 years. Some renters are experiencing more stress from higher rents with a jump in those finding the rent difficult to pay.

“A proportion of landlords continue to sell but talk of an exodus is overstated. The real pressure of higher mortgage rates on landlords hits the 20-30% with the highest loan to value mortgages where landlords may need to inject extra capital when they refinance or look to sell. Half of all landlord sales are in London and the South East where yields are lowest and the economics of being a landlord are toughest.”

‘The situation is getting worse’

Following Zoopla’s report, City Hall published polling data collected by YouGov which revealed 24% of private renters in the capital have struggled to make rent payments in the last six months.

It further found that roughly 6%, or 160,000 of the 2.7m Londoners in the private rental market, say they have fallen behind their payments over the same period.

Sadiq Khan repeated his call on the Government to introduce a two-year rent freeze, and to also ban Section 21 ‘no-fault’ evictions without delay.

“While the publication of the Government’s long-overdue Renters’ Reform Bill is a positive step forward, my message to ministers is that they must also take action now to make rents more affordable as a matter of urgency,” he said.

“As we work to build a better, fairer London for everyone, I’ll continue to stand up for renters in our city and do all I can to help them pay their rent and keep their homes.”

Ben Twomey, director at Generation Rent, said: “If London can’t provide homes for the people who want to live here, that’s a disaster not only for the city, but the country as a whole. People are being forced to move away from their families, others cannot take up job offers, and more of us are compromising by accepting overcrowded accommodation just to have a bed that lets us live here.

“The Government must do more to let London build the housing it needs, including homes at social rents that allow people on low incomes to continue living here.

“Renters in London are at a very high risk of being evicted so landlords can sell or put the rent up. The Renters (Reform) Bill could make a huge difference to their security of tenure, but it needs to ensure bad landlords can’t continue exploiting tenants, and include better protections for tenants who face eviction for reasons beyond their control.”