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Rents Rise 8 Times Faster Than Wages

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The cost of renting in London has rocketed eight times faster than wages over the past year to a new all-time high. Landlords say there is still “red hot” demand for homes across the capital from couples and families unable to afford to buy. The increase compares with shop price inflation of 2.8 per cent and far outpaces the average rise in earnings, currently running at a meagre one per cent. More than a quarter of Londoners now rent from private landlords compared with just 14 per cent in 1991 but many say they are now being priced out of the rental sector just as brutally as they have excluded from home ownership.

There are growing signs that tenants are struggling to pay the higher rents as they eat up an ever higher chunk of their take home pay. For every £1000 owed to London landlords in rent last month, almost £100 was unpaid, twice the level of tenant arrears of just four months previously. Nearly two thirds of Londoners are struggling or falling behind with their rent, leaving little left over for essentials let alone to save for a home of their own.

This is bad news for the taxpayer – a chronic lack of affordable housing means more than a third of the housing benefit bill goes on private rent.

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The cost of renting in London has rocketed eight times faster than wages over the past year to a new all-time high. Landlords say there is still “red hot” demand for homes across the capital from couples and families unable to afford to buy. The increase compares with shop price inflation of 2.8 per cent and far outpaces the average rise in earnings, currently running at a meagre one per cent. More than a quarter of Londoners now rent from private landlords compared with just 14 per cent in 1991 but many say they are now being priced out of the rental sector just as brutally as they have excluded from home ownership.

There are growing signs that tenants are struggling to pay the higher rents as they eat up an ever higher chunk of their take home pay. For every £1000 owed to London landlords in rent last month, almost £100 was unpaid, twice the level of tenant arrears of just four months previously. Nearly two thirds of Londoners are struggling or falling behind with their rent, leaving little left over for essentials let alone to save for a home of their own.

This is bad news for the taxpayer – a chronic lack of affordable housing means more than a third of the housing benefit bill goes on private rent.

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So arrears have increased at the rate of £12.50/£1,000 due per month over the last four months.

The overall arrears rate (according to the article)is 10%, if I've understood it correctly. This time next year, at the current rate, it'll be 25%. I'd say the rate of deterioration must therefore moderate very soon.

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How long can it go on?

Not that long! :blink:

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Anecdotal I know but I'm seeing a lot of property that stays unlet month in month out in ealing. Usually agents/LL asking way too much.

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Far less attention is given to renters, who now constitute more than half the market in London. Of those, half are in the social housing sector, half in the private sector where, as we report today, rents have rocketed by almost eight per cent in the past year, about three times the inflation rate. The rises are made more important by the fall in social and council housing and a corresponding increase in private rentals, from 16.6 per cent of all London homes in 1981 to a quarter now. At the same time, owner occupancy has returned almost to 1981 levels after a surge in the intervening decades. Some renters are plainly being displaced from the housing market by high prices.

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How long can it go on?

Increasing population (economic opportunities). Rigid green belt planning restrictions. Foreign money pouring in (devalued pound). Until one changes significantly.

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How long can it go on?

Next scheme; Help To Rent.

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Increasing population (economic opportunities). Rigid green belt planning restrictions. Foreign money pouring in (devalued pound). Until one changes significantly.

On the issue of the greenbelt, there's enough brownfield land within the M25, much of it already with planning permission, for many hundreds of thousands of homes, if not more. Look at the Greenwich peninsula for example - the land cleaned and ready since 1999. A huge swath of land. 14 years later only a couple of plots are built on, about 10% at most. The other are landbanked. Drip fed on at a couple of hundred a year. The millenium 'village' will not complete for 10 plus years. See also Elephant and Castle (in zone 1 central London), and many many others.

Rollover - that 25% private rent figureis only going on notified private rents. If people and situations I know are any indicator it could be a bit higher than that.

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High rents in London have forced many families to live apart during the week.....I am hearing more and more of people shacking up with other workers in the week HMO or renting a spare room off a London family whilst they work four very long days in town to travel back to another part of the UK where there family are living for the rest of the week......how long can this keep going on.

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London. Hardly a surprise, is it; especially when financial folk are earning six figures.

You don't move to the city to earn big money and complain about it. Oh, maybe the folk in the OP article do.

Edited by cashinmattress

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London. Hardly a surprise, is it; especially when financial folk are earning six figures.

Around 300,000 people work in the City. Some of those commute in from outside of London. There are 8 million people and around 3 million dwellings in London itself. Financial sector wages are not a sufficient explanation for London housing costs.

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Rents can only be set by the availability of funds to pay them, be it from wage income, benefit subsidies or investments....if the max amount of salary is already allocated towards rent, housing benefits being reduced, no proof of that yet and certain investments are bringing in a lower yield......rents will have to fall.....if rents are not falling, where is the money coming from to pay them....I suspect mainly from the state. ;)

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Rents can only be set by the availability of funds to pay them, be it from wage income, benefit subsidies or investments....if the max amount of salary is already allocated towards rent, housing benefits being reduced, no proof of that yet and certain investments are bringing in a lower yield......rents will have to fall.....if rents are not falling, where is the money coming from to pay them....I suspect mainly from the state. ;)

more like

Rents can only be set by the availability of credit and the cost of credit the BTLer can obtain, ie mortgage payments including interest. a renter pays for this from their wage income, benefit subsidies or investments....if the max amount of salary is already allocated towards rent, they cant afford my house, and someone else will. housing benefits being reduced, no proof of that yet and certain investments are bringing in a lower yield......rents will have to go up to subsidise my other lower investment yeilds......if rents are not falling, i am making money, and i am not bothered where the money is coming from to pay them....I suspect mainly from the state. ;)

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On the issue of the greenbelt, there's enough brownfield land within the M25, much of it already with planning permission, for many hundreds of thousands of homes, if not more. Look at the Greenwich peninsula for example - the land cleaned and ready since 1999. A huge swath of land. 14 years later only a couple of plots are built on, about 10% at most. The other are landbanked. Drip fed on at a couple of hundred a year. The millenium 'village' will not complete for 10 plus years. See also Elephant and Castle (in zone 1 central London), and many many others.

Rollover - that 25% private rent figureis only going on notified private rents. If people and situations I know are any indicator it could be a bit higher than that.

Brownfield land can be an important part of the mix but the National Land Use Database of Previously Developed Land (NLUD-PDL) in 2009 showed ~10,000 acres of brownfield in London suitable for housing http://www.homesandcommunities.co.uk/nlud-pdl-results-and-analysis..

At a density of 10 houses/acre this would produce 100k decent family homes. For me a decent family home is a 100' x 30' plot, 10' for front garden/OSP, 30' depth for house, 60' back garden, 30' width allows a garage on the side. 30% land left for roads, infrastructure etc.

There are approaching 400k households on the council waiting lists in London alone, plus pent-up demand from households that would like to buy privately (rather than enter social housing) but cannot afford to. So for the kind of future I would like to see, brownfield is not going to solve more than a relatively minor percentage of the problem, even iif every square yard of it were used (unrealistic, not least since ~half is privately held).

The figure you choose to use for density is obviously a key figure and can be set depending on your preferences, but I would prefer to see suburban family homes rather than more newbuild flats which are sold to foreign investors as investments.

The observations of Dr Tim Leunig at http://www.insidehousing.co.uk/ihstory.aspx?storycode=6502805 sum it up for me:

"Building another mile of housing around London would, with standard suburban planning densities, create housing for around 1 million people. It would mean that someone leaving London on the A40 or the M11, or on a train to Brighton or Basingstoke, would have to travel through suburbia for an extra minute. No doubt those people would prefer to travel through countryside for that minute, but it is hard to think that one extra minute of suburbia is a high price to pay to see 1 million people properly housed.

Just as Surbiton makes little difference to the people of Wimbledon, so an extra mile of suburbia would make little difference to the people of Surbiton."

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Around 300,000 people work in the City. Some of those commute in from outside of London. There are 8 million people and around 3 million dwellings in London itself. Financial sector wages are not a sufficient explanation for London housing costs.

http://www.guardian.co.uk/business/2012/nov/06/city-jobs-slump-low

"The number of people employed in the financial sector in London, excluding most accountants and lawyers, has already sunk below 250,000 this year, 11% down from last year. It was more than 350,000 before the financial crisis struck.

The Centre for Economics and Business Research (CEBR) suggests the City is being forced to shed jobs against a backdrop of depressed trading in currencies, gilts and equities, as well as a sustained drought in corporate mergers and acquisitions. The thinktank predicts the tally will fall again next year, to 237,036, before stabilising. The last time the City employed that few financial workers was 1993."

The vast majority of workers in the financial sector do not earn anything close to six figure salaries and the chances of them reaching those lofty heights are shrinking every year.

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Around 300,000 people work in the City. Some of those commute in from outside of London. There are 8 million people and around 3 million dwellings in London itself. Financial sector wages are not a sufficient explanation for London housing costs.

Greed is pretty easy way to explain it.

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High rents in London have forced many families to live apart during the week.....I am hearing more and more of people shacking up with other workers in the week HMO or renting a spare room off a London family whilst they work four very long days in town to travel back to another part of the UK where there family are living for the rest of the week......how long can this keep going on.

Sounds familiar. I knew folks in the '80s who would return home to a family for the weekend.

Being able to go home for the weekend is a relatively modern luxury. Even now, not everyone has it.

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not sure how a landlord can gauge "red hot demand".

He either has a tenant, or not....if he has one...he has no interest in demand...if he doesnt, he will findout, get a tenant and lose interest again..he wont be looking at demand over 3 months.

course, the people that sell these services, THEY will fluff up their skills in moving said demand to the landlord looking to fill a vacancy.

The worrying part is the 10% arrears.

Add in any voids and suddenly red hot demand means red ink on the income sheet.

Add in the problem that a tenant that cant pay HAS to be evicted, lest he falls into the "deliberately homeless" criteria.

Edited by Bloo Loo

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How much of Londoners net salary is going on housing — and if they think they will ever be able to buy their own home

Here are seven answers

I'm surprised. None of them above 40%, let alone a 1980s-style sixtysomething percent.

Indeed, those numbers are broadly in line with healthy continental markets of the 1980s, where conventional wisdom said you pay one third of your income on rent.

Edited by porca misèria

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  • 239 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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