The cost of new tenancies has already lifted by 18% since January 2022, says the thinktank’s study, driven by rising wages and the fallout from the pandemic.  

It says: “Rents tend to track wages over the long-term – and that average private rents have remained roughly constant as a proportion of average earnings since 2000

“However, the disruption caused to the rental market by the pandemic, during which evictions and repossessions were halted, meant that rent levels fell to their lowest level on record relative to earnings, and, by early 2022, were nearly 5% lower than what a long-term trend would suggest.   

“Some of the recent surge in rental prices is therefore a post-pandemic ‘correction’, returning the UK’s rent-to-earnings ratio to its long-term trend.”  

The body says this “post-pandemic catch-up” has been compounded by historically high earnings growth in recent years, with average earnings rising by 13% since the beginning of 2022.  

Although the study, called ‘Through the roof: Recent trends in rental price growth,’  points out with that catch-up now done and pay growth easing, “market rents for new tenancies have already begun to cool, falling from annual growth of 10.4% in June 2023, to 7.5% by March 2024”.  

But it adds: “Although growth in rent levels for new tenancies is cooling, it could take years for the burst of growth we’ve seen to make its way through the whole private rental sector.   

“New renters will pay these new higher rents, while existing tenants reaching the end of a tenancy or forced to accept within-tenancy price rises, will in future face large rent hikes.  

“If we assume average rents paid will return to their pre-pandemic level compared to earnings in three years’ time, then rents (for all tenancies) would see over 13% price growth over that period (or 4.2% a year on average), much faster than the 7.5% growth in average earnings (or 2.4% a year on average) forecast by the Office for Budget Responsibility over those years.”  

Resolution Foundation senior economist Cara Pacitti says: “Millions of families agreeing new tenancies across Britain have faced surging rents in recent years, as we have emerged from the pandemic.

“Those rises for new tenancies are starting to slow, but how much renters actually pay will continue to outgrow how much they earn for some years to come as those not yet exposed to higher prices are hit. 

“With more families renting privately, and renting for longer too, these rent surges are a bigger problem for Britain, and require bolder solutions from policy makers.  

“Short-term solutions include regular uprating of Local Housing Allowance to support poorer families, and the ultimate longer-term solution is to simply build more homes.” 

National Residential Landlords Association chief executive Ben Beadle points out: “Rising rents are a result of a range of factors. While wage growth plays a role, a key driver is the imbalance between supply and demand.  

“With demand far outstripping available supply, there are an average of 15 prospective tenants chasing every rented property, double the pre-pandemic level.  

“The impact of rising interest rates and tax increases should not be downplayed. 82% of buy-to-let loans are interest only and the number of buy-to-let mortgages in arrears more than doubled in the final quarter of 2023 compared to the year before. 

Beadle adds: “The Institute for Fiscal Studies has said that ‘the more harshly that landlords are taxed, the higher rents will be’”.   

“Ultimately, a healthy rental market is one in which there is a supply of rented housing to meet ever-growing demand. Ministers need to act to support the sector by developing pro-growth tax measures to deliver this.”  

Generation Rent chief executive Ben Twomey says: “Renters have nowhere to hide from the housing crisis.   

“Rising rents mean we have less to put aside for the future, and less to spend on actually living. As well as building more homes and giving enough support through the benefits system, the government needs to stop landlords raising rent beyond what tenants can actually afford.”