Millennials renting in the UK are spending upwards of a third of their take home pay of £17,359 on rental payments, according to the latest Landbay Rental Index.
For tenants aged between 18-39 and living alone, 69% of a monthly post-tax income of £1,447 is spent on £1,012 of rent. In a shared house of two people, overall rent of £1,153 adds up to 39% of each tenant’s income, while those co-habiting in a three-bed property would each spend 30% of their monthly take home pay on a rent of £1,322.
Rents have continued to rise over the last five years, increasing by 9% across the UK since April 2012 and by 8% in London – with monthly payments remaining a huge burden on those struggling to save, despite the pace of rental growth beginning to slow since August 2015, from 2.66% to 0.82%. While rents have begun to fall in prime Central London, outer boroughs popular with millennials, such as Barking and Dagenham, Havering and Bexley have seen rents grow by 26%, 18.9% and 18.2%.
Although rents are beginning to turn a corner, for young people, who are often attempting to juggle the double-edged sword of inflation of over 2%, low interest rates – and in many cases large sums of student debt – spending such a percentage of take home pay on rent leaves little to cover regular monthly living costs and bills, and even less to save towards their future, be that a pension or a deposit for a home of their own.
John Goodall, CEO and founder of Landbay said: “Despite the multitude of measures introduced with the aim of encouraging first time home ownership, such as Help to Buy and Shared Ownership schemes, young people make up a significant proportion of the 4.3 million people currently renting across the UK, few with the means to save for the sizeable deposit needed to get on the housing ladder, while also saving for their future. The cost of renting a property remains a huge burden, especially in London where average rents are significantly more expensive than the rest of the country. Is it any wonder that this generation are having to turn to the Bank of Mum and Dad for help?
“Whether tenants are renting as a stepping stone on the way to home ownership – or in some cases choosing to rent for life – this generation are relying on a well-served buy-to-let market to ensure rental growth doesn’t become unbearable. What is now needed is some firm government commitment to improving standards, affordability and supply of rental properties. Institutional investment and the subsequent growth and professionalisation of the private rental sector are already helping control rental growth and improve living standards for renters, so we hope to see some clear plans outlined in this month’s party manifestos ahead of the General Election in June.”