If you rent a house in London and work full-time, chances are the economic recovery has been something you read about in the newspapers but haven’t felt in your pocket.
That’s because over the last three years, London has experienced the slowest growth in average wages of any part in the UK, but the fastest increases in the cost of renting.
Between 2012 and 2015, research by the Office for National Statistics (ONS) showed median incomes grew by just 0.4 per cent a year in the capital, but the cost of renting inside the M25 surged by 3.3 per cent every twelve months.
That has left London’s private-sector renters ploughing 34 per cent of their disposable income in housing – more than twice the proportion spent on rent by those living in the North East, where rental costs eat up the smallest amount of incomes in the country.
Earnings growth and rental price increases, 2012-15
“Rentals have become notably less affordable in London and the South East in particular, and have become more affordable in the North East and North West,” the ONS said.
With inflation having been near zero since it fell dramatically at the end of 2014, the assumption has been that even modest wage increases of around two per cent have boosted living standards across the country. But the ONS report suggested that isn't the case for everyone. Even as inflation has tumbled, the cost of renting has been increasing at its fastest pace in more than two and a half years.
Rents across the country grew by 2.9 per cent in the year to February and have been increasing faster than wages in all but four months since the middle of 2011.
Meanwhile, a new report out today by business-backed campaign group, Fifty Thousand Homes, has said that surging rental prices are placing pressure on London’s creative, arts and entertainment sectors, as employees struggle to keep up with the cost of living in the capital.
The research, conducted by the Centre for Economics and Business Research, said workers in some of the creative industries would already have to pay more than 60 per cent of their income to rent a studio flat in outer London, with people working in nursing, manufacturing and schools likely to face similar “extreme housing pressure” over the next decade.