The “collapse” of homeownership for working age people is being lamented across the press, but there’s more behind the rising age of UK renters.
The UK housing industry has been shifting away from the goal of homeownership for many years. Since the early 1990s, the percentage of younger people who own a property with a mortgage has been on the decline, while the number of those living in privately rented accommodation has shot up.
Now, according to the latest report from the Office for National Statistics (ONS), a quarter of people aged 16-64 rent privately, whereas this was the tenure type of just one in 10 people in 1993.
However, the key finding in the latest report, titled Living longer: changes in housing tenure over time, is that those of prime working age, between 35 and 44 years old, are now three and a half times more likely to be renting than they were in 1993. The figures are from the most recent analysis taken in 2017.
Who is the new generation rent?
Generation rent is still predominantly made up of younger people. The ONS data shows that those aged 16 to 24 make up around 67.8% of the private rented sector (PRS), followed by 25-34-year-olds accounting for 43.7%.
Yet while the “middle” age group of 35-44-year-olds only make up just over a quarter of the sector (27.8%), this is a steep rise compared to 1993, when this age group accounted for just 8.2% of the total.
For anyone working or investing within the UK property sector, these trends are important. While the changes can be partly attributed to increasing house prices combined with stagnant wage rises pricing people off the housing ladder, there’s more to the story. People are less likely than ever to prioritise homeownership over other things, and the growing rental market is plugging this gap.
Looking at the context
While homeownership levels are dwindling as people buy properties later – or increasingly not at all – it seems that the difficulty of climbing onto the property ladder is not necessarily the only cause.
Renting privately comes with a number of advantages, which are beneficial not just to younger people but to older generations, too. For example, maintenance responsibilities in a privately rented property fall to the landlord rather than the tenant, as well as major costs such as boiler and heating repairs, leaks and other integral issues.
According to the ONS: “This is something that may be particularly beneficial in later life as reduced income, deteriorating health and decreased cognitive function may impair the ability of people to maintain their homes.”
The increased flexibility that comes with renting rather than owning a home can also be a positive for many.
“Renting privately may also mean that older people are more likely to be able to move to a different, better-suited property if their needs change, as they would not need to rely on the sale of their house.”
How renting is changing
Private landlords have a tendency to get a bad rap in the media, with programmes and stories about “rogue landlords” focusing on the difficulties faced by some tenants. However, the industry is quickly becoming more professionalised, with stronger crackdowns on problematic landlords, and standards are improving.
The rise of build-to-rent is one of the most promising trends backing this improvement in the industry. Build-to-rent properties are professionally managed, designed specifically for tenants. They are modern, set in locations where renters want to live, with added amenities such as concierges, workspaces, gyms, social areas and outdoor green space.
Houses in multiple occupation (HMOs) are also more regulated now than they ever were. Licensing schemes are in place across many areas of the UK, with minimum room sizes and inspections for large HMOs. While they once fell under the poor reputation of old-fashioned and undesirable “bedsits”, they are now a popular choice for professional tenants.
As the PRS sees such improvements, and tenants become older and wiser with higher standards, buy-to-let landlords are under more pressure than ever to up their games. This is a positive for everyone in the industry; tenants can expect better accommodation, while landlords see their reputations improve, along with their rental yields as happy tenants stay put for longer.
A new way to live
The way people live today is vastly different to how it was 20 years ago. Many argue this is partly down to our move towards a “subscription-based” society, with technology partly to blame. Most people these days not only have a smart phone subscription and Netflix or similar, but also subscriptions to food deliveries, drinks packages, beauty products and dating websites. To this end, living accommodation is increasingly becoming something people are happy to subscribe to, paying a monthly, no-strings fee and bypassing the commitment of owning a home.
People are also starting families later in life, and prioritising their careers and social lives until an older age than ever before. This means factors such as having a good commute – by living close to work or transport hubs – and having easy access to flexible work spaces are now more important. Renting for this demographic is now the preferable option to saving up for a hefty house deposit and committing to a mortgage. You can move house more easily when your situation changes, live in a preferable location compared to where you could afford to buy, and share with friends to save money.
While in the long run, homeownership might be more cost-effective, the statistics show that for a growing number of people, the benefits of renting for longer are outweighing the appeal of the property ladder.