From today's Metro "Want to be in London? Pay twice the rent"
"While Londoners typically benefit from higher average incomes than the rest of the UK, affordability is being squeezed," said Martin Totty, chief executive of Barbon Insurance. "For rental property to be affordable, a tenants gross income must be at least two and a half times his or her annual rent. Our data shows that rents in London have pushed beyond that."
Is this really an accurate description of affordability?
If Ricardo's Law of Rent is true, we'd expect the amount of income left after taxes and rent has been paid to be roughly equal. This is what we get.Greater London £8382, East Anglia £9991, Wales £9273, South West £6927, South East £9945, West Midlands £8178, North West £8167, Yorks & Humberside £8009, N Ireland £9142, East Midlands £8762, North East, £9125, Scotland £9278
Given that we are using average wage to average rent ratio, we shouldn't be too surprised about the unevenness. If the survey had used mean wages and rents, this might have looked at lot flatter.
But the point is, discretionary income is a much better measure of affordability. In which case, London certainly isn't the worst. I'm also guessing London gets the lions share of Housing Benefit, which makes it look more unaffordable than it is.
