While everyone is being affected by the rising cost of living, it is perhaps those in the under 30 age group for whom it is having the biggest impact, notably on their ability to get on to the property ladder. In the last hundred years there had been a general decline in the number of people renting their homes, with the aspiration of the UK public to be home owners. However, this trend is currently being reversed, particularly amongst young adults, leading to their nickname of “Generation Rent”.
High house prices and difficulty in obtaining a mortgage have left increasing numbers of people, particularly the young, with no other option than to rent a property within the private rental sector. As no improvement is on the horizon for the economic situation and property market, the reliance on renting a home is only likely to deepen, with more and more young people priced out of the housing market. The Joseph Rowntree Foundation, who campaigns for a more equal society, have estimated that by 2020 an extra million under 30s won’t be able to own a home of their own. More worryingly they estimate that 400,000 won’t be able to afford rent within the private sector either, which has the potential for an explosion in the number of homeless young people.
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Feeling amongst the young
Despite over three quarters of those aged 25 to 40 surveyed by the National Centre for Social Research still hoping to own their own home, thoughts on whether this will become a reality are not so optimistic. Two thirds of those still to become home owners felt they had no chance of getting on to the property ladder. Despite difficulty in securing a mortgage being cited as the main reason for their feelings on this, only 5% were actively saving towards a deposit; the remainder had no spare money to save, had been unsuccessful in previous attempts at saving or felt that there was no point in doing so. However, on a slightly more positive note, renting in the longer term is now viewed by society as a more acceptable option and a valid choice to make, with people choosing to stay in the same rented property for years as opposed to months.
The options open to the young
If renting in the longer term in the private sector doesn’t appeal or isn’t a viable option due to financial constraints, what are the other options? For many, staying with their parents will seem like the obvious choice and this number is predicted to rise to 3.7 million in the under 30s by 2020. For those who still dream of owning their own home it is a good opportunity to help them save for the all important deposit necessary to secure a mortgage, as while rents in the private sector remain high there is little chance for them to save at the same time as renting. Social housing is limited, but some councils are planning to prevent higher earners from securing a home this way, leaving it for those in most need. The Government has also pledged to build an extra 170,000 more affordable homes by 2015, helping more young people to get on to the property ladder. However, as only 16,000 of such homes have been built in the last year, they really need to pick up the pace if they are to meet their promise.
What this might mean for landlords
It has been suggested that if renting long-term is to become the norm, to help potential tenants, particularly those in vulnerable situations, the Government should be giving landlords tax breaks as an incentive to reduce the price at which they rent their properties out for and to offer more secure longer tenancies and perhaps longer term buy to let mortgages. While the Government have so far not been receptive to this suggestion, in other countries where this strategy has been used, it has certainly had the desired effect with rental costs falling for tenants.