Menu ×

Blog Rent Rockets: UK Rent Increases Expected to Outstrip Wage Growth Over the Next Three Years

24 Apr 2024

A new forecast from the Resolution Foundation has sparked concerns as it predicts that rent increases across the UK will outpace wage growth significantly over the next three years. This development is set to add considerable financial pressure on millions of households, with rents projected to rise by an average of 13% by 2027.

The thinktank’s report, “Through the Roof,” outlines that the private rental market’s current high growth will likely permeate existing tenancies, leading to a 4.2% annual increase in average rents over the next three years. This rate of increase substantially exceeds the 7.5% growth in average workers’ earnings (or 2.4% per year) forecasted by the Office for Budget Responsibility for the same period.

The report arrives amid criticisms of Rishi Sunak’s government for diluting reforms intended to enhance protections for renters. Critics argue that the decision, particularly regarding measures against no-fault evictions, suggests a prioritisation of landlords’ interests over those of tenants. These developments come against the backdrop of a deepening housing affordability crisis, sparking allegations of governmental neglect of tenant welfare.

The surge in rent is a continuation of trends observed post-pandemic and during the cost of living crisis, where the market saw record growth rates. Initially, this growth was a rebound from the pandemic’s disruptions, which saw a temporary collapse in rent levels due to economic uncertainties and halted evictions and repossessions.

However, despite a recent cooling off — from a 10.4% annual increase in June 2023 to 7.5% by March 2024 for new tenancies — the broader impact is expected to linger. The Resolution Foundation warns that it may take years for the heightened rent levels to fully integrate into the entire private rental sector. Existing tenants facing the end of their tenancies or within-tenancy price rises are likely to encounter significant rent hikes.

The report also addresses the misconception that recent regulatory changes and higher interest rates have caused a significant exodus of landlords from the market, noting that the private rental sector has only shrunk by 1% since mid-2019, according to Bank of England research.

Cara Pacitti, a senior economist at the Resolution Foundation, emphasised the growing challenge, “With more families renting privately and for longer periods, these rent surges present a significant and expanding issue for Britain, necessitating bold actions from policymakers.”

Proposed short-term measures include regular updates to the local housing allowance to assist poorer families, while long-term solutions focus on increasing the housing supply.

In response, a government spokesperson highlighted ongoing efforts, including the Renters (Reform) Bill, which aims to provide greater security and empower tenants. The government also remains committed to its long-term housing strategy, which includes an £11.5 billion investment in the Affordable Homes Programme, with a target to build one million homes over this parliamentary term.

Apply Today

Residents who rent through HomeNow can partially insulate themselves against house prices outstripping wage inflation as we share any growth with them. As the house value increases so does their deposit contribution. Please book a consultation with one of our team to find out more.

Book a Consultation