Millennials spend over a third of take home pay on rent
Written by Warren Lewis of Property Report, 5th May 2017
According to the latest Landbay Rental Index, millennial tenants are spending a third of monthly take home pay on rent, with those in a three bed property spending 30% and those in a two bed spending 39%. Those attempting to live alone face spending over two thirds (69%) of monthly take home pay.
For tenants aged between 18-39 and living alone, 69% of a monthly post-tax income of £1,447 is spent on £1,012 of rent. In a shared house of two people, overall rent of £1,152 adds up to 39% of each tenant’s income, while those co-habiting in a three-bed property would each spend 30% of their monthly take home pay on a rent of £1,322.
Rents have continued to rise over the last five years, increasing by 9% across the UK since April 2012 and by 8% in London – with monthly payments remaining a huge burden on those struggling to save, despite the pace of rental growth beginning to slow since August 2015, from 2.66% to 0.82%. While rents have begun to fall in prime Central London, outer boroughs popular with millennials, such as Barking and Dagenham, Havering and Bexley have seen rents grow by 26%, 18.9% and 18.2%.
Although rents are beginning to turn a corner, for young people, who are often attempting to juggle the double-edged sword of inflation of over 2%, low interest rates – and in many cases large sums of student debt – spending such a percentage of take home pay on rent leaves little to cover regular monthly living costs and bills, and even less to save towards their future, be that a pension or a deposit for a home of their own.
John Goodall, CEO and founder of Landbay said: “For intermediaries, this generation is the future of their client base, a generation who will face a tough financial journey.”
Whether these millennial tenants are renting as a stepping stone on the way to home ownership – or in some cases choosing to rent for life – this generation are relying on a well-served buy-to-let market to ensure rental growth doesn’t become unbearable. What is now needed is some firm Government commitment to improving standards, affordability and supply of rental properties.
Institutional investment and the subsequent growth and professionalisation of the private rental sector are already helping control rental growth and improve living standards for renters, so we hope to see some clear plans outlined in this month’s party manifestos ahead of the General Election in June.”