Millions of Britons are parting with the bulk of their disposable income as they attempt to combat soaring mortgage repayments and rental costs in an age of falling wages, according to figures published today.
The Resolution Foundation alleged that an estimated 1.6m households in Britain are expending over half their collective paycheques on housing costs. The think tank noted that those especially vulnerable are young private renters and singles residing in one bedroom abodes, particularly in London.
Roughly 1 million taxpayers feeling the strain of hefty housing costs are in low to middle income jobs and as such, have sparse resources remaining after their monthly payments to spend on other fundamentals. Given the rising costs of energy and food stuffs across the UK, and the concurrent stagnation of wages behind inflation, the current situation regarding exorbitant housing prices is expressly troubling.
Laura Gardiner, an analyst at the Resolution Foundation, echoes this viewpoint, pointing to the need for the construction of more affordable housing to combat the pricey rental sector, whilst not constricting the property-related aspirations of young people in low to middle income jobs.
Ms. Gardiner stated: “With house prices and rents rising in some parts of the country, we should be concerned about the ability of this group to absorb additional pressure on their household budgets from higher mortgage payments and rents. Ms Gardiner warned that the situation would only worsen unless policymakers allocated funds to the supply of low-cost housing. “Otherwise we can expect to see a steady rise in the number of households that are ‘housing pinched’ over the coming years,” she cautioned.
This outlook on the dearth of affordable housing was echoed by consumer groups as well, with housing charity, Shelter, adding their voice to the exasperated masses clamouring for more homes to be constructed.
Campbell Robb, chief executive of charity Shelter, said: “Our lack of affordable homes and sky-high house prices are leaving more and more families with no choice but to live in unstable and expensive private renting, with many struggling to make ends meet.
“We hear from people every day having to cut back on essentials because they can barely make their rents each month, let alone save for a home of their own.”
Rental Costs Increasing in Real Terms
Alternate data from LSL property services, estate agent giant, says that rental costs are increasing once again in real terms, having risen below inflation since June 2013. The average monthly rent shot up by 2% in the 12 months preceding July, just ahead of the 1.9% inflation rate as defined by the CPI. LSL recorded the average monthly rent, across the UK, at £753 working out at £9, 036 a year ñ which makes grim reading for young people, the majority of whom could be wondering how theyíre possibly going to escape the ërental cycleí and begin their ascent on the property ladder.
David Newnes, director of LSL, seemed unruffled by the increase in rental costs, stating that it currently prime time for the rental market due to the influx of university students seeking temporary accommodation from September onwards.
Brandon Lewis, the housing minister, went on the defensive in response to the LSLís figures, claiming them to be skewed and suggested they trivialise the Coalitionís ëlong term economic planí regarding the private rental sector.
Mr. Lewis said: “These figures from LSL are misleading, as they are only based on new, rather than existing, rental contracts. “The latest official statistics show that private rental prices are falling in real terms over the last year, further evidence that our long-term economic plan is working. “But we want a bigger and better private rented sector. Our £1 billion build to rent fund is on track to have started work on up to 10,000 homes specifically for private rent by 2015.
“And our new how to rent guide is enabling better rental deals, without introducing unnecessary red tape which would increase rents and reduce choice and quality for tenants.”
The Resolution Foundationís findings reveal a great disparity between supply and demand regarding affordable housing. Calls for the government to address this problem have intensified, but with weak wage growth and rising house prices underpinning the market currently, spiralling costs appear to be the reality facing the majority of low-income households.
Moreover, although the government seem to have blueprints in place for the much needed reshaping of the rental sector, at present, young people are being consigned to a limbo, where their disillusionment grows with every disproportional chunk of their paycheque they expend on inflated housing costs. With the shadow of an interest rate hike looming ever closer, the situation seems bleak for low-income households.