Finance News

High Rents Could Hold Back Economic Recovery

Em Morley - October 2, 2012

Research from the charity Shelter seems to suggest that rising private rents are detrimental to the recovery of Britain’s economy.

High Rents Could Hold Back Economic Recovery

High Rents Could Hold Back Economic Recovery

Ex Labour party employee Peter Jeffreys, argues that there is evidence that high rent costs are making tenants hold back on their spending on consumer goods. Instead, rising numbers of tenants are turning to costly credit in order to pay their way.

Concern

Jeffreys is concerned that rising rent is increasing the gap between costs and wages. He argues: “Coupled with falling household incomes, that means that rents are eating up even more disposable income.”[1]

Jeffreys continues: “Given that there are 8.5m renters in England, and one in four Londoners, and that in the capital renters pay on average between 42% and 46% of their wage in rent, there is a strong case that a lot of potential consumer spending is being lost.”[1]

Mr Jeffreys also said it was not a case of the high rents simply finding their way back into the recovering economy through landlords. As he makes clear: “The majority of landlords are individuals or couples renting out just one of two homes. Many of those landlords are using the rents to pay off their mortgages and make a small yield.”[1] Jeffreys was also circumspect about the effect on the overall economy: “A huge amount of money paid in rent is not recirculating into the economy, but rather it is financing mortgage debt.” [1]

Jeffreys’ thoughts in full can be seen at http://blogs.lse.ac.uk/politicsandpolicy/are-high-rents-holding-back-the-recovery/

[1] http://old.lettingagenttoday.co.uk/news_features/High-rents-are-holding-back-Britains-economic-recovery