Newly released figures show a significant increase in average deposits tenants need to secure properties. Below, we examine the current challenges facing tenants in the rental market.
Research from Zero Deposit, a UK-based deposit-free renting platform, has released a report that examines the challenges that renters currently face, including rising deposits, the rental gender pay gap, and rental affordability by profession.
With landlords currently facing significant challenges surrounding rising mortgage interest rates and increased legislation, the report shines a light on the impacts of the government’s lack of support for the private rental sector.
Average rental deposits
Zero Deposit measured average monthly earnings (net) against the current average price of an up-front deposit for a rental property, revealing the proportion of income tenants require to secure a home.
The report found that the average rental deposit is now £1,434, with the average monthly UK rent at £1,243. This is based on the common requirement that a deposit is up to five weeks’ rent.
The average person in the UK takes home £2,228 per month (net) in income, meaning that the average renter now has to spend 64% of a single month’s income to pay their tenancy deposit.
Furthermore, the increase in average rents sees tenants paying 56% of their monthly income to cover their rental costs. Given the demand and supply disparity in the current market, the cost of a deposit and the first month’s rent are often required within the same month. As a result, UK renters face total costs of £2,677 to secure a rental property, the equivalent of 120% of the average net monthly income.
Rental gender pay gap
Due to the significant gender pay gap in the UK, this proportion of income spent on deposits and rent is higher for women than it is for men.
A UK male’s average monthly income is £2,590, which means they require 55% of their monthly income to cover a rental deposit, up 3% in the last year. Once they’ve paid the deposit, 48% of their income is required to cover rent, a 2% increase over the past year.
Conversely, women have an average income of £1,858 per month. As such, 77% of their monthly income is required to cover the average deposit of a rental property, another 3% increase in the last year. Consequently, UK women need to use 67% of their monthly earnings to cover monthly rental payments, a further 3% increase.
Rental affordability by profession
The report also provided insight into rental affordability by profession; cleaners, hairdressers, and chefs were revealed to be the worst-hit regarding market affordability.
The average income for a cleaner is £969 per month, meaning the cost of an average deposit makes up 148% of a single month’s pay and 128% is required for monthly rental costs.
Other professions include secretaries, estate agents, nurses, marketing professionals, IT workers, plumbers, electricians and teachers, all of whom are required to spend more than 50% of their monthly income on a deposit alone.
Even higher earners, such as pilots (34%), doctors (36%), and lawyers (40%), have to spend over a third of their monthly income to secure their rental property with the average deposit. This highlights how rising prices present a considerable barrier across all pay scale levels.
What this means for landlords
With affordability stretched for tenants and landlords, the government needs to put better support in place to make the PRS an attractive investment for landlords and an affordable option for renters.
Sam Reynolds, CEO of Zero Deposit, commented, “Renters up and down the country are facing an incredible financial challenge at the moment, especially those with lower incomes who are undoubtedly struggling with the high cost of living. But this is a challenge for the majority of renters, with little hope of improvement in 2023 without urgent Government intervention.”
Landlords are doing all they can to keep their properties affordable and competitive, but as the cost of renting out a property rises alongside the increased costs faced with remortgaging, the responsibility lies with the government to find a solution for the current market challenges.
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