People in London living on furlough have been using around 86% of their income, on average, to cover the cost of renting, new research has shown.
Benham and Reeves, one of the capital’s largest independent letting and estate agents, also found that in some boroughs the level of income required to cover the cost of renting for those on furlough has already exceeded 100%.
Prior to the pandemic, the average tenant paid £1,644 ($2,121) a month in rent and earned an average net salary of £2,639. However, London tenants living on furlough have seen their net monthly income reduce to £2,003.
Under the current furlough scheme, which has been extended until December due to the nationwide lockdown, the government pays 60% of gross earnings for those on furlough up to a cap of £1,875, with the employer then required to cover a further 20% to meet a 80% threshold at a total cap of £2,500.
In Westminster, the average tenant surviving on furlough pay will see their monthly net income reduce from £4,038 to £2,003. Prior to the pandemic, 75% of monthly earnings were required to cover average rent of £3,046 in the borough but those tenants on furlough have seen this jump to a staggering 152%.
Tenants in Kensington and Chelsea, Camden, Hammersmith and Fulham and Islington have likewise seen the average cost of renting exceed 100% of average income for an employee on furlough.
While the introduction of the new Job Support Scheme will offer a further lifeline to businesses and employees after the furlough scheme eventually ends, it means this rental unaffordability could climb even higher, the results show.
Those still able to work will receive 20% of their pay as usual, with employers paying a further 4% and the government paying 49% to a cap of £1,541.75 per month.
As a result, the average worker in London receiving this support will see their net monthly income reduce to £1,912. This means the percentage of their salary required to cover rent will now climb.
Director of Benham and Reeves, Marc von Grundherr, said: “The outlook for London’s tenants is a tough one at present with a second national lockdown preventing many returning to work fully, if at all, while still having the struggle of paying rent and other monthly outgoings.
While the government has introduced a number of schemes to help lighten this financial burden it’s unlikely to be enough with many seeing the cost of rent alone swallowing the majority, if not all, of their monthly income.
“Of course, there will be those in a better position than the average tenant but it’s important to note that there will be many more that are worse off and facing an even tougher task.”
The chancellor’s furlough scheme had been due to close at the end of October, however, Boris Johnson announced its extension due to a second national lockdown that will see non-essential shops shut until 2 December.
“I’m under no illusions about how difficult this will be for businesses which have already had to endure such hardship this year and I'm truly, truly sorry for that,” the prime minister said.
“And that's why we're going to extend the furlough system through November. The furlough scheme was a success in the spring, it supported people and businesses in a critical time.”
Watch: What is the Job Support Scheme and how has it changed?