The Resolution Foundation has warned that rent rises are set to outpace earnings growth in the coming years, with average rents forecast to increase by 13% over the next three years. The think tank, which focuses on improving living standards for low and middle-income families, said the typical cost of new tenancies has already surged by 18% since January 2022.
The foundation attributes the sharp increase in rental prices to a post-pandemic rebound and recent wage growth. During the health crisis, evictions and repossessions were paused, which contributed to the current surge. Although the catch-up phase is now complete and salary increases are slowing, the foundation warns it may take years for the rapid growth already seen to filter through the entire private rental market.
New renters will face higher costs, while existing tenants reaching the end of a tenancy or forced to accept within-tenancy price rises will experience large rent hikes. If average rents paid return to pre-pandemic levels compared to earnings within three years, rents could grow by more than 13%, outpacing the expected 7.5% earnings growth over the same period.
Cara Pacitti, senior economist at the Resolution Foundation, said: “Millions of families agreeing new tenancies across Britain have faced surging rents in recent years as we have emerged from the pandemic. Those rises for new tenancies are starting to slow, but how much renters actually pay will continue to outgrow how much they earn for some years to come as those not yet exposed to higher prices are hit.”
Pacitti called for bolder policy solutions, including regular uprating of Local Housing Allowance and building more homes. A government spokesperson responded: “Our Renters (Reform) Bill will give people more security in their homes and empower them to challenge poor practices. Through our long-term plan for housing, we are investing £11.5 billion in the Affordable Homes Programme and remain on track to build one million over this Parliament.”
