The average household in Great Britain spent 42% of their post-tax income on rent in 2021, the highest proportion since property services company Hamptons began recording this data more than a decade ago.
According to the latest Hamptons Monthly Lettings Index, record-breaking rental growth saw households spend an average of £13,560 on rent last year.
Private tenants spent a collective total of £62.4bn on rent, up from £58.2bn in 2020.
With household bills added, the average tenant household spent 52% of their post-tax income on bills and rent. This figure is expected to hit 54% by the end of 2022 as the cost-of-living crisis worsens, equating to an extra £4.6 billion cost for tenants annually.
Collectively, tenants paid a total of £77.8bn in rent and household bills last year, up from £73.4bn in 2020. Tenants in the southeast spent the highest proportion of their post-tax income on rent and bills, 64% in 2021, which is set to rise to 65% in 2022.
“Even if household incomes rise by the forecast 3.75%, it won’t be enough to fully offset rising utility bills, and tenants, in particular, will feel the pinch,” Aneisha Beveridge, head of research at Hamptons, said. “Financial pressures are raining down on households, but while last year it was rental growth that ate into tenants’ incomes, this year, it’s more likely to be energy costs.”
Beveridge said that rental growth is slowing down and rents across Great Britain are expected to end the year 2.5% up on 2021, down from 6.7% in February.
“Rent and bills typically tend to get paid first, with whatever money is left over being saved or spent on other things,” she said. “With more income tied up in essentials, it’s likely that discretionary spending is set to fall later this year, which is bad news for the wider economy. And as mortgage rates creep up, homeowners are likely to face similar pressures too.”
The Hamptons Lettings Index uses data from the Countrywide Group to track changes to the cost of renting. The index is based on the 90,000 homes let and managed by Countrywide each year, adjusting for their location and type. It is based on achieved rather than advertised rents.
Bills, as used in this report, include council tax, gas, electricity, broadband, and TV license. Great Britain figures are based on average privately rented household gross income of £43,880 in 2021.