RENTS AND HOUSEHOLD BILLS BY REGION
Tenants in the East Midlands will be hardest hit by the soaring cost of living. Currently they spend 16% of their post-tax income on bills, the highest of any region. The average household will spend 58% of income on rent, plus bills, against 56% in 2021.
In London, by contrast, household bills account for just 6% of post-income tax income: salaries are higher in the capital. Also London rental properties tend to be newer, smaller and better insulated, which lowers energy usage.
Nevertheless, rents in the capital are more expensive than those elsewhere. As a result, the average London tenant paid £23,380 on rent in 2021 - which equated to 48% of posttax income.
In 2022, the average London tenant is set to spend 55% of post-tax income on rent and bills. This compares with 54% in 2021 - and 49% a decade ago.
Rapid rental growth since the start of the pandemic is having the greatest impact on tenants in the south of England. The South East, for example, is the only region in which rent makes up more than half – 52% - of the average tenant’s income. Fuel and other bills add another 12%.
This means that the average tenant here spent £18,490 (64%) of post-tax income on rent and bills in 2021, against 59% in 2019. This could now rise to as much as 65% by the end of the year.
Rental growth has been slackening since the autumn of 2021 in most regions. In July 2021, the annual rate of increase on a new tenancy peaked at 8.7%. By January, this had slowed to 7.0%, falling to 6.7% in February. Yet, despite the drop this was still the strongest rate of growth recorded in any February since our records began in 2013.
In the past four months, rents have picked up in the Midlands and in the North. The average annual rent rise in the North was 9.6% in February, up from 7.3% in January. In the Midlands, the annual increase was 9.5%, against 8.0% in January.
Traditionally, squeezes to household finances tend to come from recessions coupled with falling wages. This makes the current pinch in household finances unique, with fairly strong wage rises coupled with even bigger increases in the cost of living. While the forecast slowdown in rental growth over 2022 is good news for tenants, how long it takes for utility bills to get back towards something like normal levels is going to define how well-off households feel over the next couple of years.