Published: 21 Aug 2014 by John Bibby

A couple of weeks ago I wrote about the different estimates of rent increases in the English private rented sector. Are rents going up by 1%, 5% or 7%? Hopefully that blog explained that it all depends on who you ask and exactly what you mean by your question.

What wasn’t covered was a more fundamental point: that on their own, rent inflation measures don’t actually tell you much. On their own they’re pretty academic.

A rent increase of 1% can be harder to bear than a rent increase of 5% if the former is a rise on an already very high rent and the latter on a currently low one.

A rent cut of 1% can still be bad news if your income has fallen by 10% and you were expecting the rent to fall further.

The real thing that matters when it comes to rents is affordability: how high your rent is relative to your income and how it is changing relative to your income.

Rents are typically considered unaffordable if they take up more than 35% of take-home pay.

This makes two pieces of income-related news released last week vitally important for anyone concerned about private rents.

Firstly, the UK Labour Market Statistical Bulletin showed that incomes (excluding bonuses) have increased by only 0.6% in the last year. So even according to the lowest rent inflation statistics – the ONS ones based on all rents, not just the typically higher market rents – rents rose by almost twice as fast as incomes in the last year.

Given that, as the English Housing Survey reports, England’s renters already spend 40% of their incomes on rents, this relative increase in rents represents yet further deterioration in the affordability of an already expensive tenure.

The second piece of news was about the outlook for income growth. In response to the low wage growth over the last year, the Bank of England has cut its forecast for wage growth for the next year to only 1.25%.

With pressures on rents showing no indication of weakening, the prospect of yet another year of low wage growth suggests that renting is only going to get more expensive.

There is sometimes a temptation for people who are concerned about the cost of living in the private rented sector to focus on reports of high rent inflation. This makes sense: big numbers make headlines.

But there’s also a danger of focussing too much on the big numbers, because if the rate of rent inflation slows – if the numbers get smaller – it can seem like the problem has gone away.

This misses the fact that even if rents only creep up by a small amount, as long as they keep on outstripping wage growth there will be an impact on England’s already overstretched renters. It misses the fact that even no rise at all can mean rents remaining very high. What really matters is affordability.

Over the next few months Shelter will be doing some work to examine the affordability of private renting across the country, which we’ll release in the autumn. We hope that this will help to move the debate on from arguments about which is ‘the right’ measure of rent inflation and paint a true picture of the genuinely high prices paid by England’s renters.