London renters must work 197 days of the year on average to pay their landlords before they can start earning for themselves, according to a new report.
The Adam Smith Institute (ASI) has branded 16th July the Cost of Rent Day to highlight how much of renters’ salaries goes towards their housing costs. Before the Cost of Rent Day, tenants are essentially working for their landlords.
Cost of Rent Day is when renters have earned enough — before tax — to cover their annual rent bill. The national average fell on 5th May, a whole two months before London.
“Higher salaries, which many professionals have historically moved to London for in the first place, do not compensate for the higher rent prices that they face,” said James Lawson, chairman of the ASI.
“In the midst of a cost of living crisis and nearly two decades of stagnation, London’s Cost of Rent Day is a damning indictment on the performance of our economy, and our failure to match the demand for homes with supply in the capital.”
The news comes as London renters try to absorb staggering 11 per cent annual rent hikes, with an increasing number struggling to pay for food and essentials during the cost-of-living crisis.The ASI calculated rent as a share of income by dividing annual rents by gross annual pay for 309 areas across England — including all the London boroughs.
There is some disparity between the borughs. In Kensington & Chelsea, where rent has a 0.73 share of income, the Cost of Rent Day is not until 25th September. However in Croydon, where rent has a 0.41 share of income, the day fell on 31st May.
Generally it’s not until the summer starts that London tenants start putting money in their own pocket before that of their landlord’s.
The ASI has also created a tool where renters can calculate their own Cost of Rent Day.
London desperately needs more houses to be built, argued the think tank. “Concrete proposals to reform our sclerotic planning system and to deliver the homes we need must be an urgent priority for both the government and opposition parties,” said Lawson.
Compulsory purchase orders, developing metropolitan green belt land and releasing all green belt land with in 10 minute’s walk of railway stations are all policies that the ASI has suggested.
One week in, the new Labour government has laid out plans to build 1.5 million homes over the course of the next Parliament by bringing back mandatory housebuilding targets, building new towns around the country, and reforming the planning system. Less desirable parts of the green belt will be recategorised as grey belt to encourage development.
