In a recent analysis conducted by Paragon Bank, it has been revealed that the North East of England was the most affordable region for private rentals in the country last year. With average earnings amounting to £30,078 in 2022, the rental affordability ratio in the region stood at 23.5 percent. This ratio is calculated by dividing the average annual cost of private renting, which was £7,054, by the average earnings figure.
The analysis highlights a slight drop of 0.2 percent in the affordability of privately rented homes in the North East over the past year. While the mean rents paid by tenants increased from £6,424, it was largely offset by a corresponding rise in salaries. This trend has been more pronounced in the North East compared to its neighboring regions, resulting in the region’s ascent from the third to the first position on Paragon’s Rental Affordability Index. The previously most affordable region, Yorkshire & The Humber, now holds the second spot, while the North West has slipped to third place since 2021.
However, the index shows a different story at the opposite end, with London, the South East, and the East of England retaining their positions as the least affordable places to rent in England, just as they were in 2021. Average rents paid by tenants in London witnessed an increase from £18,244 to £19,213 last year. With average earnings in the capital amounting to £39,654 in 2022, the rental affordability ratio stands at 48.5 percent, a slight decrease from 50.2 percent the previous year.
Paragon Bank’s Rental Affordability Index calculates the average rental affordability ratio for each region in England using recently published government data on average rent amounts and gross annual earnings figures.
Nationally, rental costs consume 32.9 percent of the average salary, which is £33,270.
Richard Rowntree, Managing Director of Mortgages at Paragon Bank, commented on the findings, stating, “We continue to observe a significant disparity in the affordability of privately rented homes across different parts of England, with the north being notably more economical compared to London and the South West.”
Rowntree further added, “Rent payments still constitute a substantial portion of monthly expenses for many individuals. While landlords often limit rent increases to retain good tenants and acknowledge the financial challenges faced by renters, they themselves confront rising costs, making some degree of rental inflation inevitable.”
He emphasized the pressing need for housing policies that promote high standards and incentivize responsible lettings business owners to invest in the private rented sector (PRS), considering the sustained high demand for affordable PRS homes that surpasses the available supply.