Growth in the private rented sector over the last decade has come on the back of fewer younger people buying their own home. The latest figures released from the census show that the number of households renting privately has grown by 1.12m (or 29%) over the last decade. This compares to a 6% increase in households overall.
While tighter mortgage lending criteria introduced following the financial crash has reduced the number of borrowers struggling to make their mortgage payments, it has also put homeownership beyond reach for some people on below-average incomes with small deposits. As a result, our analysis reveals that the growth in the number of privately rented households between 2011 and 2021 was led by the 10% most deprived areas of England & Wales.
Between 2011 and 2021 there was an increase of 151,800 privately rented households living in the 10% most deprived areas of England & Wales. This means that 23% of households in the poorest 10% of the country rent their home privately, up from 18% a decade ago.
Meanwhile, the 10% most affluent areas of the country saw the private rented sector add fewer new households than anywhere else in the country. The number of households renting in these areas rose by 80,100, or by just over half the increase seen by the least affluent areas. Just 13% of households rent their home privately in the 10% most affluent areas, up from 10% ten years ago.
All of this means that around 60% of privately rented homes are found in the 50% least affluent areas. While there have been an array of homeownership schemes over the last decade, helping hundreds of thousands of people onto the housing ladder, typically the biggest beneficiaries have been more affluent tenants. This is why homeownership rates have held up more strongly in the most affluent areas of the country.
Rising rents, together with an increase in households renting, has meant that the total amount of rent paid by tenants in the most deprived areas has more than doubled over the last decade. In 2012 tenants in the 10% most deprived areas paid £2.7bn in rent. By 2022, that figure reached £5.4bn. Rents in the most deprived areas rose 50% over this period, faster than in any other type of area and outpacing the 39% recorded in the most affluent areas.
Across the whole of England & Wales tenants spent a total of £71.5bn on rent in 2022, a record figure. This roughly equates to the OBR’s forecast for corporation tax intake in 2022-23 (£73.9bn). An increase in the number of privately rented households combined with record-breaking rental growth has pushed the rent bill up from £63.9bn in 2021 and £42.8bn back in 2012. Between 2012 and 2022, 54% of growth in the total rent bill came from rising rents with the remaining 46% coming from an increase in the number of privately rented households.
However, there could be better news for tenants on the horizon. While 2022 was a record-breaking year for rental growth, the pace of growth cooled in latter months and seems to have stabilised around the 7% mark, coming in below wider inflation figures. That said, although we may see the rate of growth soften a little more in the coming months, rents are still likely to rise around 5% in 2023 given the lack of homes available to rent and inflationary pressures on landlords.