Tenants are spending 42% of their income paying the rent, claims leading estate agency

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Tenants are spending an average of 42% – £13,560 – of their earnings on rent as a result of record-breaking rental growth, one of the UK’s leading estate agencies has claimed.

Hamptons’ monthly lettings index reports that it’s the highest proportion since its records began in 2010 and that with household bills added, the average tenant household spent 52% of their post-tax income on bills and rent last year. This is set to hit 54% by the end of 2022 as the cost of living crisis worsens, adding up to an extra £1,008.

However, rental growth slowed across Great Britain for the sixth consecutive month, says Hamptons, as the average cost of a newly let property rose 6.7% in February compared to the same month last year, down from an annual growth of 7% in January and a peak of 8.7% recorded in July 2021. 

Rent rises

It expects growth to slow further to about 2.5% by the end of 2022, but says this will be offset by an increase in the energy cap and general price rises which could see tenants’ household bills rise by 15%, significantly outpacing earnings growth which is expected to rise to 3.75%.

This increase is set to hit tenants in the East Midlands the hardest, as they currently spend a higher share of their post-tax income on bills (16%) compared to anyone else. 

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Head of Hamptons research Aneisha Beveridge says financial pressures are raining down on households. “Even if household incomes rise by the forecast 3.75%, it won’t be enough to fully offset rising utility bills and tenants, in particular, will feel the pinch,” she adds.

“Rent and bills typically tend to get paid first, with whatever money is left over being saved or spent on other things. With more income tied up in essentials, it’s likely that discretionary spending is set to fall later this year which is bad news for the wider economy.”

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