Home Residential PropertyRental Property Tenants earnings fall below rental affordability threshold

Tenants earnings fall below rental affordability threshold

by LLP Editor
25th Mar 22 11:59 am

Research by leading rental portal, Rentd, has found that the earnings of the average tenant sit below the rental affordability threshold in five of the nation’s nine regions.

The research by Rentd looked at the current average income of a tenant and how it compared to the average level of rental affordability based on the benchmark of two and half times the average rent.

The research shows that the average annual income for a rental tenant in England is currently £28,116 – 12% below the wider average.

As a rule of thumb, tenants should work to a rental affordability ratio of earning 2.5 times their rent in order to live comfortably. However, this is also a gauge that many letting agents will use when deciding if you are eligible to rent a property.

The average rent bill in England is £968 per month, or £11,616 per year. This means a tenant needs to earn £29,041 per year for their home to be truly affordable. This is, however, £925 more than a tenant’s average annual income.

In fact, as many as five regions are home to tenant earnings that come in some way below the rental affordability ratio of 2.5 times income.

In London, the average tenant earns £39,585 a year but with annual rent costing an average of £21,084, this means they’re coming in -£13,125 below the affordability threshold.

In the South East, they’re falling -£4,531 short; in the South West, it’s -£4,046; in the North West it’s -£2,985; and in the East, affordability is missed by -£1,471.

However, four regions do offer a great chance of rental affordability.

In the North East, where the average annual rent cost is £6,996, a tenant would ideally earn £17,490 a year in order to live comfortably. In fact, the average tenant income for the regions is £25,878, £8,388 above the affordability threshold. This makes the North East the most affordable region in England.

In the East Midlands, the average tenant has an income £4,878 above the threshold; in Yorkshire & Humber, average income is £3,978 above the threshold; and in the West Midlands, income is £1,740 above the threshold.

Founder and CEO of Rentd, Ahmed Gamal, commented: “Rental affordability has been a burning topic for quite some time and unfortunately, it still remains a serious issue in today’s rental market. More and more of us are remaining reliant on the rental market until far later in life and this means more tenants fighting it out for a limited supply of rental homes.

Rather than tackle this issue head on and look to increase rental stock supply, the government has actually looked to reduce the number of landlords operating within the sector via a number of changes such as tax relief and an increase in stamp duty on buy-to-let homes.

They’ve done so in order to increase supply to an overheated housing market to gloss over the fact that they simply haven’t built enough houses, leaving the nation’s tenants out in the cold as a result.

At the same time, wage growth simply hasn’t kept pace with the wider cost of renting and living and this has only helped increase the issue of affordability within the rental sector.”

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