'Postcode lottery' as low earners face paying more than half salary on rent

Median-priced flats in Edinburgh – the biggest and most unaffordable rental market – could consume 58 per cent of a local middle earner’s wage, or 97 per cent of a low earner’s wage.

Campaigners and politicians said our investigation illustrates how unaffordable renting has become in Scotland’s “increasingly broken housing market”. The Joseph Rowntree Foundation stressed that a third of Scotland’s private renters – around 250,000 people – already live in poverty.

Property experts confirmed that dwindling rental stock is increasing competition and pushing up rent prices as landlords sell up amidst record house prices.

Nationwide data shared with The Ferret also shows that homes sold to first time buyers in Scotland last June cost, on average, 3.7 times the average national earnings. Since then, house prices have surged further.

Developers, letting agents and landlords are making “insane” profits, argued the tenant’s union, Living Rent. The most recent accounts from housebuilders active in Scotland showed collective pre-tax profits of more than £3bn.

The Scottish Government said it had made a “clear commitment” to introducing rent caps in the current parliamentary term as part of its new deal for tenants consultation.

But Scottish Labour warned of rents “spiralling out of control” with “record breaking increases”. Both Labour and Living Rent urged the government to introduce rent controls immediately.

To get a picture of the rental market, The Ferret analysed 4,467 Scottish rental property listings advertised on 16 January via property search engine, Nestoria.

In this snapshot, the average monthly rent was £775, with two-bed properties the most common option. Renters could typically pay £600 for a one-bed, £750 for a two-bed, £950 for a three-bed and £1,400 for a four-bed.

Comparing local earning statistics from the Office of National Statistics (ONS) against local rents showed that letting is most unaffordable in Edinburgh. For example, the capital’s median – or middle – earners could spend 58 per cent of their salary on the median rent, or 31 per cent on the cheapest.

In Glasgow, median earners could lose 38 per cent of their earnings on median rents, or 24 per cent on the cheapest. Middle earners in East Lothian, Stirling and East Dunbartonshire could spend 36 per cent of their wages on the median rent, or 23-29 per cent on the cheapest.

Comparatively, median earners in East Ayrshire or Renfrewshire could spend just 20 per cent of their salary on the median rent, or 15-16 per cent on the cheapest.

Rents most unaffordable to the lowest paid

For Scotland’s lowest earners, even the cheapest local lets in some areas could consume the bulk of their salaries.

Edinburgh’s lowest paid could lose 52 per cent of their earnings on renting one of the capital's cheapest properties. Renting a median-priced flat could consume 97 per cent.

In East Lothian, low earners could spend 46 per cent of their wages on the cheapest rents, or 57 per cent on the median. The cheapest to median rent prices for low earners in Midlothian could take up 44-50 per cent of their wages, and 42-66 per cent in East Dunbartonshire.

Rent was most affordable in Inverclyde, East Ayrshire and West Dunbartonshire, where the cheapest to median lets ranged from 24 per cent to 33 per cent of the lowest wages.

But these locations had just one per cent or less of all properties advertised on Nestoria. Many areas lacked rental homes, leaving renters with little choice of accommodation. We found no lets advertised in Shetland or the Western Isles.

Some 30 per cent of listed lets were in Edinburgh, 22 per cent in Aberdeen and 16 per cent in Glasgow. Aberdeen’s cheapest flats could account for 30 per cent of the lowest income, while Glasgow’s could require 39 per cent.

Other larger rental markets included Dundee, Perth and Kinross and Renfrewshire, where the cheapest rents could cost 27 per cent of the lowest local incomes, and South Lanarkshire, where they could take up 30 per cent.

Call for rent controls as one third of renters in poverty

“These stark figures lay bare the cost of the renting crisis that so many households are struggling with,” said Labour’s housing spokesperson, Mark Griffin MSP.

“There is no time to waste while tenants are struggling to make ends meet in the middle of a cost of living crisis. The SNP must move forward with plans for rent controls as a matter of urgency, and alongside a real plan to fix Scotland’s increasingly broken housing market.”

The Joseph Rowntree Foundation (JRF) said: "What this research illustrates is just how far the rents being asked for outstrip what those on modest incomes are likely to be able to afford.”

While social security support is available, “we can demonstrate it simply isn’t enough to prevent hardship," said a JRF spokesperson. Young people, single parents and ethnic minority communities were among those most impacted, JRF said.

Scotland needs a stronger affordable housing scheme, the spokesperson argued. A third of Scotland’s private renters – around 250,000 people – live in poverty, according to research from the JRF and others.

Of these renters, 40 per cent were pushed into poverty by housing costs. “That’s 100,000 people who could be helped with effective action to lift incomes and reduce costs,” JRF added.

Rufus Boverie of Living Rent said: “Up and down the country, we hear of tenants struggling and being driven into poverty by sky-high rents. These numbers just confirm our experiences and the need for the government to introduce real rent controls now.

“Property developers, landlords and letting agents are making insane profits and reaping the benefits of the lack of regulation. Tenants can't afford another five years of rent hikes.”

Tenants’ rights minister, Patrick Harvie MSP, said the government had provided £82m in housing support this year, £39m to avoid evictions due to the pandemic and was committed to introducing rent controls.

“I am determined to put in place measures which are robust and which stand the test of time,” he said. The government would deliver 110,000 affordable homes over the next decade and had given councils the power to control short-term lets, which had led to loss of rented properties, added Harvie.

Scotland’s biggest letting agents

The Ferret also can also reveal that renters are being asked to outbid one another just to secure a home, further pushing up rents. Soon, “tenants may not be able to find anywhere to live regardless of cash” and the supply drought must be “tackled urgently”, warned the Scottish Association of Landlords.

Research shows the continued rise of rents, although there is no consensus on the extent. ONS stats show that Scottish rents rose by 2.6 per cent in the year from January 2021 to 2022.

The HomeLet Rental Index estimated that the average Scottish rent rose by 9.4 per cent over the same period, while CityLets last year reported average annual rises of 5.2 per cent.

Scotland’s major letting agents include Yorkshire’s Lomond Group, which claimed to be Scotland’s largest agent, with 9,500 properties, after acquiring the Edinburgh-based ​​DJ Alexander in December. This was reportedly the group’s 24th acquisition in 2021.

Lomond Group – the result of its £100m merger with Linley & Simpson last year – also owns agencies including Allen & Harris, Braemore, FineHolm, Stonehouse, Burnett and Reid, and Broughton.

Both Slater Hogg and Howison, with 25 branches, and Aberdeen’s Aberdein Considine with 19 in Scotland and Northern England, also claim to be Scotland's largest agent. The former is ultimately owned by Yorkshire’s Skipton Building Society.

Skipton announced profits of £122m for the first half of 2021, up £48m on the same period a year earlier.

Global real estate giant Re/Max has 18 Scottish offices. Glasgow-based Clyde Property, which ​​has 11, claims to manage over 2,700 lets.

Record house prices

House prices repeatedly reached new record highs over the last year. Halifax said prices in Scotland rose 8.9 per cent over the year to the end of January. The continued rise would make barriers to ownership "more acute”, it said.

The average asking price in Scotland again rose by 7.5 per cent between January and February alone, according to Rightmove, which it attributed to the rise to housing shortages and buyers seeking to move house as Covid-19 restrictions ease.

In January Nationwide released a study to gauge housing affordability in the UK. Its data, shared with The Ferret, shows that homes sold to first time buyers in Scotland in June cost, depending on the area, between 2.4 and 5.9 times the average local earnings.

Banks will typically lend a customer intending to buy a property no more than 4.5 times their income. The customer would also need to cover a deposit of at least five per cent of the property’s value, and other fees.

Housebuilder profits

Developers are also set to profit further as house prices soar. Most of the biggest housebuilders active in Scotland announced significant annual profits in recent months, following a Covid-19 downturn.

The upmarket Cala Homes, owned by a financial services firm, predicted record revenues of £1.25bn for 2021, with its £130m pre-tax profit up 35 per cent on its 2019, pre-pandemic revenues.

Some housebuilders bought out their rivals or were acquired by private equity firms. Edinburgh-based Miller Homes was bought by US equity giant Apollo Global Management in December.

Elgin-based Springfield Properties’ £18.5m pre-tax profits for the year to the end of May were up 81 per cent on the previous year. It bought the Inverness-based Tulloch Homes for £56.4m in December.

Conversely, Aberdeen’s Stewart Milne and Elgin’s Robertson Homes reportedly saw losses of £71.5m and £6.7m in 2020 respectively. Avant Homes, which is ultimately owned in the US, reported pre-tax losses of £3m in 2021.

Priced Out is an investigation by The Ferret, co-published with The Herald, exploring the impact of - and reasons that lie behind – the cost of living crisis in Scotland. Support their journalism by becoming a member for £3 a month. Use discount code PRICEDOUT to get your first month free.