Paragon Bank’s latest analysis highlights the North East as England’s most economical region for private rentals last year. Following closely are Yorkshire and the Humber, and the North West. Conversely, London, the South East, and the East of England remain the least affordable regions for renting.

The research has demonstrated that an average annual income of £33,270 across England results in a rental affordability ratio of 32.9%.

Data reveals that in the North East, the average income in 2022 was £30,078. When dividing this by £7,054 – the average yearly cost for privately renting a home in the area – a rental affordability ratio of 23.5% is generated.

This figure signifies that the past year has witnessed a slight decrease of 0.2% in the affordability of privately rented homes in the North East. This follows an increase in mean rents paid by tenants from £6,424, which was approximately matched by a yearly increase in wages.

This pattern has been more pronounced in the North East when compared to neighbouring northern regions. Consequently, the North East has risen two places from third to first on Paragon’s Rental Affordability Index. Last year’s top affordable region, Yorkshire & The Humber, has slipped to second place, while the North West has dropped one place to third since 2021.

Meanwhile, London, the South East, and East of England maintain their 2021 rankings as the first, second, and third least affordable rental regions in England, respectively.

In London, the average rents paid by tenants climbed from £18,244 to £19,213 over the past year. With average earnings in the capital amounting to £39,654 in 2022, London’s affordability ratio is 48.5%, down from 50.2% last year.

Paragon’s Rental Affordability Index determines the average rental affordability ratio for each English region. It does this by utilising recently published Government data on the average rental expenditure and gross annual earnings figures.

Commenting on the analysis, Richard Rowntree, Paragon Bank’s Managing Director of Mortgages, remarked: “Just like we saw last year, there’s a stark contrast in the affordability of privately rented homes across different English regions, with the North proving more cost-effective than London and the South West.

“Rental payments continue to account for a considerable portion of monthly expenses, often being the most substantial outlay. While landlords commonly restrict rent increases to retain good tenants and acknowledge the financial challenges renters face, they are also dealing with escalating costs, making a degree of rental inflation inevitable.

“Over recent years, the demand for affordable private rented sector (PRS) homes has surged and continues to surpass supply. Therefore, it’s crucial that housing policy evolves in a way that maintains high standards and makes investment in the PRS an appealing prospect for responsible lettings business owners.”