Those falling rents: some footnotes

Each time I blog about how rents are falling, not rising, in real terms there’s a burst of comments from which some common patterns emerge. So I thought it’d be useful to address them in one go:

‘But my own personal experience/area is different’

Yes, it might be. And so the conclusion is…? Unless you’re claiming that everyone and everywhere is like your own experience, that doesn’t tell us anything about the overall picture. And remember that if you’re saying your area is one side of the national average, then that means there are other areas on the other side of the average too.

I’m struck by how this comment is almost never followed by ‘and so it’s really interesting to discover that my own experience is so different from the overall picture’.

It’s almost as if some people say this as a way of wanting to dismiss the figures, going for a more indirect version of…

‘Those figures are clearly wrong. Everyone knows rents are going up.’

Sometimes it’s only when a set of figures show something that we don’t expect that we look at them in detail and discover something wrong. So to be surprised and then to closely examine figures for flaws is fair enough, indeed even useful.

But simply dismissing out of hand figures because they don’t say what you expect? That’s just ignoring evidence to suit your preconceived fixed ideas. So far, I’ve not seen a reason to doubt the underlying figures save for…

‘Ah, but the rents for people who have just moved are going up fast.’

Now this is a good point and seems to be backed up by the evidence, making it a good example of why questioning data to dig up more information is useful – see above and thank you to those who have pointed me at this data.

But remember two things.

First, if overall rents are falling in real terms and there is a sub-group for whom they are rising in real terms, then that means there are other people for whom rents must be falling even more than the average in real terms.

As with #1 I’m struck by how people only seem to be interested in the exceptions that fit the ‘rents are getting much more expensive’ narrative. The exceptions the other way, the people for whom rents are falling, don’t get a look in. Is that a wise balance to strike in comments?*

Second, just because rents for people who have just moved are going up quickly that doesn’t mean overall rent rates of changes are going to be dragged up towards that rate of change over time. That’s because the rental market is always a mix of some people who have just moved and many who have not. The overall picture of falling rents in real terms takes both groups into account. Those for whom rents are rising in real terms are more than cancelled out by those for whom rents are falling in real terms (and indeed as people move from the first group to the second group, it means for individuals things if anything get better over time).

‘But it’s different in London’

Yes, though the figures are not massively different and, as Alex Marsh puts it well:

Ever since I have been involved in housing policy research, which is rapidly approaching quarter of a century, there has been a concern that policy is formed in Westminster and Whitehall on the basis that London’s problems are the problems that matter and/or they generalise straightforwardly to the rest of the country. That might be slightly harsh, but it’s in the right ballpark.

There is now, to be fair, much greater recognition that housing markets are local not national. But even so there is still a tendency to think that the key housing problem facing the country is housing supply in London and its commutable environs. That is surely a problem, but it is a very different type of problem to those in other parts of the country.

Living in London myself, I’d certainly like to see policies that work for London, but again I’d caution against only picking an exception that suits a pre-conceived idea. Saying, “yes but it’s different in London” shouldn’t then become “so let’s make national policy based just on those London figures”.

‘Yes, but wages have been falling in real terms too, so rents are getting harder to afford.’

That’s true, but only just. This statement is rarely accompanied by evidence, and I suspect the actual figures are much smaller than some people saying this expect.

Compare January 2011 with August 2014 (the former date being the start of the private rents data series I’m using and the latter date being the latest figure at the time of writing in the ONS average earnings data set I’m using, but eyeballing the graphs suggests the exact dates used don’t matter ).

Over that time rents have gone up by 4.3% and average earnings have gone up by 3.2%, which is not very different especially as that 1.1% gap is over two and a half years. It’s less than one half of one percent a year; that isn’t soaring.

Or to put it another way, if you were paying 10% of your earnings in rent in January 2011 and both went up in line with these figures, then two and a half years later you’d be paying 10.1% of your earnings in rent now. That’s a very small change.

It’s also a change that isn’t restricted to housing by any means. The big issue here is the level of changes in average earnings (and their struggle to keep up with inflation). People feeling the pinch isn’t due to that tiny relative change in earnings and rents – and hence the answer to it isn’t to talk about the levels of rents but to talk about the levels of wages.

* No, of course. In fact it’s another example of the Evidence, Discard, Distort trope:

Report starts with average figure. Then says some areas are much worse than the average. Then goes on to only talk about those place which the story has just told you aren’t typical but are the outliers.

Take the evidence, discard it by picking out the outliers in one direction only, and then distort the story by only talking about those extremes on one side of the average: evidence, distort, discard is a remorseless threesome that plagues all sorts of media reporting which is apparently fact-based but actually abandons the evidence almost as soon as it is presented.

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