Rent: The Overlooked Expense At The Centre Of The Cost Of Living Crisis

This is how much people now pay in rent – and the devastating impact it's having.
The cost of living crisis came into full effect this April
Busà Photography via Getty Images
The cost of living crisis came into full effect this April

The cost of living crisis may have been triggered by rising energy bills, climbing taxes and inflation, but rent plays a much larger role in draining people’s pockets than has been acknowledged.

The UK has been in a housing crisis for years and charities are now warning that it could all come to a head as people struggle to balance their bank accounts.

So just how serious could this be and can anything be done to prevent it?

How bad was it before the cost of living crisis?

National Insurance Contributions and energy bills went up in April, meaning inflation has now reached a 30-year high at 7% – but rental rates had been climbing slowly in the background for several months.

According to the ONS, private rental prices increased by 2% in the year leading up to January 2022 – the largest annual growth rate since February 2017.

Only London was the exception as demand for a home in the capital fell due to an increase in remote working, but residents in the city still spend the largest proportion of their income on rent out of the whole of the UK.

According to Statista, housing in the UK is also more expensive than any other European country. The data shows UK rental prices have increased by 12.3% since January 2015 and wages have not increased at the same rate.

Rachelle Earwaker, senior economist at the Joseph Rowntree Foundation, told HuffPost UK: “Even before the current cost of living crisis, 55% of all low income private renters were stuck paying unaffordable rents, and over a fifth (22%) were paying more than 40% of their income on rent.”

For comparison, an ONS study from 2016 shows tenants paid an average of 27% of their gross salary on rent (although this shot up to 49% when looking at people in London).

Rental rates have already increased this year

According to property firm Rightmove, renters outside of London are paying an average of £1,088 per calendar month now (and increase of 10.8% year on year), while those in the capital are paying £2,193 on rent per month (a 14.3% increase).

This is the first time rent outside of London rose by more than 10% annually, while the increase within the capital was the largest of any region on record.

There are three times more tenants than there are available rental properties, creating the “most competitive rental market Rightmove has ever recorded”, the firm claimed.

Now, people are torn between buying essentials and eviction

While there’s been widespread outrage as people face the reality of “heating or eating” due to the cost of living crisis, there’s been far less said about the risks of homelessness.

ONS has reported that wages have dropped by 2.1% and households incomes are expected to drop by more than 2.2% this year – the largest drop since records began.

Pay growth v inflation
PA GraphicsPress Association Images
Pay growth v inflation

Pay may have risen slightly, but inflation is overshadowing it after rising to its highest level since 1992 in March – this means many people’s salaries can’t match the rising food and energy prices.

“Families on low incomes already spend a higher proportion of their income on essentials including rent, meaning as living costs rise sharply they more quickly face the prospect of going without these essentials,” Earwaker said. “Many families will be worried about facing eviction.”

Polly Neate, Shelter’s chief executive, also told HuffPost UK: High housing costs are at the core of the cost-of-living crisis. Private rents are the highest on record, every other bill is skyrocketing, and welfare support is lagging dangerously behind.

“When people can’t feed their families and pay the rent, that’s when they fall into debt and face eviction.

“Our frontline services hear from people every day who’ve got literally nothing left in the bank and are on the brink of homelessness.”

Unsurprisingly, the Office for Budget Responsibility subsequently has predicted that living standards will now start falling faster than any time since the 1950s.

How food prices have risen in the past 12 months.
PA GraphicsPress Association Images
How food prices have risen in the past 12 months.

Homelessness could rise

Jon Deakin, from the London organisation Evolve Housing, also explained how homelessness in the capital – where rents are typically much higher – could be particularly exacerbated by this crisis.

“We know that high rents, coupled with a lack of affordable housing in London, can force people into insecure living arrangements, where homelessness is a much higher risk,” he told HuffPost UK.

“The rising living costs of living we now see inevitably make this situation even more difficult, pushing people into more precarious positions and increasing the risk of them losing their homes.”

It’s worth noting one in every 53 people in London are already homeless, according to Shelter.

However, Deakin added that homelessness is “extremely complex, with many different causes ranging from financial factors to family breakdown”.

He pointed out: “This homelessness may take different forms.

“Rough sleeping is the most visible, but in other cases increased living costs may mean people resort to sofa surfing with friends and family, or stay in temporary accommodation provided by councils (which is sometimes of a poor standard).”

So, has the government tried to help?

In short, yes – but it’s not enough.

Chancellor Rishi Sunak announced in his spring statement: “I know this is a worrying time for many families which is why we are taking action to ease the burden by providing support worth around £22 billion in this financial year, including for the most vulnerable through our household support fund.

“We’re also helping as many people as possible into work – the best way for families to gain economic security in the longer term.”

Sunak is referring to the £150 council tax rebate to households in council tax bands A, B, C or D and a £200 rebate off domestic electricity customers from October onwards.

A spokesperson for the Department for Work and Pensions also told Inside Housing: “This government is working across the country to help people with their housing needs, and is spending over £2 billion to tackle and prevent homelessness and rough sleeping over the next three years.

“The change in Discretionary Housing Payment funding also reflects the rise in Local Housing Allowance brought in at the start of the pandemic, which we are maintaining, and government spending on housing support remains higher than pre-Covid-19 levels.”

More certainly needs to be done

As Deakin pointed out, the council tax rebate programme is not flawless.

He said: “We are concerned that in cases where people rent and their landlords are paying council tax, the rebate being offered may not be passed onto tenants, but pocketed by landlords.”

The £150 rebate also does not go very far when compared to the annual £700 rise in the average household’s energy bill.

Prime minister Boris Johnson has hinted that more help is set to come to the poorest households in the coming months, but has not provided any details as yet.

He told LBC Radio: “The cost of living is the single biggest thing we’re going to have to fix, and we will fix it. As we go forward we need to do more.”

Writer and Guardian columnist George Monbiot took aim at the government on Twitter earlier this month, declaring that “many years of misrule have led to a disastrous convergence of forces”.

He blamed the council house sell-offs, calling out a “continued failure to build new social rented housing”, plus the deregulation of the private rented sector along with the conversion of actual homes into second homes, or AirBnB properties.

“The result is a green light for those who own property to exploit those who do not,” he said. “It’s the primary means by which wealth is transferred from the poor to the rich. And it sits at the heart of the cost of living crisis. So please let’s stop glossing over it.”

Some want benefits to be increased

The government cut its discretionary housing payment fund for local authorities by £40 million in March – meaning people may have to dip into their non-housing benefits to pay their rent.

Homeless charity Crisis told Inside Housing that this decrease may lead to “tens of thousands of people falling into arrears and facing eviction as people struggle to stay afloat”.

Earwaker, from the Joseph Rowntree Foundation, also recommended: “The Government should urgently, at a bare minimum, ensure benefits rise in line with the cost of living, and immediately bring housing benefit back in line with rents, as they have been frozen at rent prices from September 2019.”

This suggestion was echoed in Neate’s feedback too: “The best way to help people struggling to pay their rent would be for the government to reverse damaging welfare cuts.

“Housing benefit is still frozen at 2020 levels and discretionary housing payments were slashed by £40 million in March. If we’re going to prevent rising homelessness this year, housing benefit has to be fit for purpose.”

But a rent freeze could be a dead end

At the beginning of March, London mayor Sadiq Khan asked No.10 to give him powers to freeze private rent in the capital for two years.

However, Deakin pointed out that such a policy could be counterproductive in the long-term.

He said: “We have seen before with plans like this that people on low incomes are sometimes priced out of their homes – this is because some landlords move to evict lower income earners or those on housing benefit, and get around the rent freeze by setting a new rate for new tenants.

“Additionally, we know that people on low incomes are often less likely to complain or have problems with their homes fixed, like removing mould or fixing insufficient health and safety standards.

“A rent freeze may well exacerbate this, as landlords will be less likely to maintain high standards in their properties.

“What’s more, once the freeze is over, the high jumps in rent landlords may make to compensate could again push more people into homelessness.”

Lisa Campbell Price from Habitats for Humanity also told HuffPost UK: “A rent freeze would provide immediate financial help, but it doesn’t solve the core problem which is a lack of housing supply.”

She instead put forward her charity’s “Empty Spaces initiative” where unused commercial space is turned into housing for the most vulnerable.

She explained: “We have a pragmatic approach, repurposing what already exists is a sustainable and creative way to fix the housing problem in the country.”