HOUSEHOLDS in Scotland are seeing their incomes swallowed up by the fastest growing increases in housing costs outside of London, according to a new report.

The rising share of income spent on housing over the last two decades has been charted by the Resolution Foundation (RF) for a study published today [tue], warning that soaring housing costs risk putting a major brake on the UK’s living standards recovery in the aftermath of the credit crunch.

The independent think tank found that the average Scottish household spent 18 per cent of their income on housing costs in 2015, compared to 12 per cent in 1995. The costs include rent, mortgage costs plus interest, buildings insurance premiums and factoring fees, but not council tax or gas and electricity bills.

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Only households in the UK capital have experienced a sharper hike, with Londoners spending 28 per cent last year compared to 21 per cent 20 years ago.

However, the share of total income spent by Scottish households on housing costs remains the second lowest in the UK, after the north-east of England.

The analysis will form part of the RF's forthcoming housing audit, due to be unveiled in the coming weeks, which will project the share of income spent on housing up to 2020 according to age groups, regions and housing tenures.

Today's report also indicates that the share of income spent on housing costs went from being fairly stable at an average of around 17 per cent per household in the 1990s and early 2000s, before ballooning in the rampant house-price boom of the mid-2000s.

By the eve of the financial crash, the average working age household was spending around a fifth of their income on housing.

Although this shrank in the wake of the economic downturn, RF warns that rising housing costs are once again outstripping income growth - especially for low to middle income earners who are now spending 26 per cent of their income on housing costs.

Lindsay Judge, senior policy analyst at the Resolution Foundation, said: “The share of income working people spent on housing was fairly stable throughout the 90s and early 2000s. But spiralling house prices and stagnating wage growth created a growing wedge between housing costs and incomes, which peaked on the eve of the crash.

“Falling housing costs helped soften the living standards squeeze for many households during the downturn. But these costs are rising again and risk holding back the living standards recovery. This is particularly the case in London where any benefit from rising incomes is being wiped out by steeper housing cost increases.

“There is a risk that housing could do to future living standards what falling earnings did to recent living standards. Avoiding this will require decisive policy action over decades to get housing costs back under control."

The report stresses that too many households are now spending a "perilously high share of their income" on housing, with around 3.3 million households spending at least a third of their income on housing costs – up from 1.6 million in the mid-1990s.

It also highlights that private renters are spending a greater share of their income on housing (30 per cent) than mortgage owners (23 per cent) or social renters (20 per cent).

The analysis follows recent RF research on the shift from home ownership to private renting, which has been particularly acute for lower income households, young people and those living in London.