The demographics within ‘Generation Rent’ continue to change, and new research reveals there’s an older age group that property investors could look to cater for.
When considering a new property investment opportunity, having a target tenant in mind can be helpful. Whether you hope to let the property to students, young professionals or a family could determine the type of property you invest in as well as how you market it.
It has been widely reported in recent years that there has been a new wave of Generation Rent, as the age at which people now buy has become later, while there has been a huge growth in the number of ‘lifestyle renters’, who choose to rent due to the flexibility and freedom it can offer.
While in the past, the most common tenant type may have been in their early 20s, the new Generation Rent is likely to be much older. Increasingly, landlords are receiving enquiries from more middle-aged households looking to rent.
Who’s the new Generation Rent?
There has been a huge influx in middle-aged renters aged 45-64 over the past decade, with numbers almost doubling from 691,000 in 2011 to 1.18 million in 2021, according to Paragon Bank‘s analysis of government figures.
More than a fifth of this age group have lived in the private rented sector (PRS) for more than 15 years, while 17% have rented for 11-15 years; indicating that they are likely to continue to rent in the long term.
The growth in this age group of Generation Rent was by far the biggest over the time period, indicating new trends in who lives in the private rented sector and providing an alternative tenant type for landlords who would prefer to target older renters.
Renters aged 65 and over also saw a strong increase in number, rising by 38% over the past 10 years. The number of renters aged 34 to 44 grew by 21%, while 16-34-year-old renters only increased by 3%, according to Paragon.
The benefits of older tenants
Many property investors who operate in city centres will target young professional renters, who tend to prefer to live close to work and other amenities. However, as Paragon’s study reveals, there are some advantages to targeting older tenants.
One major benefit is that 45-to-64-year-olds are more likely to see their rental home as a long-term option, rather than a ‘stop-gap’ situation prior to purchase. This could mean a more reliable tenant for the landlord, with fewer void periods to deal with and therefore a stronger rental return.
Of this age group of Generation Rent, 23% have lived in their current rental home for more than 10 years, while a similar number (22%) have lived there for five to 10 years. The research also indicates that they are more likely to live alone, meaning they may be more likely to live in a flat or a small house.
That said, there is a strong desire among this age group to buy, with 47% saying they wished to do so – but only 19% said they were actively saving towards getting onto the property ladder. A quarter (25%) of these were actively searching, with 4% in the process of buying and 71% still saving.
Half of tenants are over 35
As Richard Rowntree, managing director of mortgages at Paragon Bank, points out, more than half of the people currently classed as Generation Rent are over the age of 35, and this trend continues to grow.
“There is a perception that the PRS is home to the young when, in fact, over half of tenants are aged over 35 and the greatest increase in the number of households is in the middle-aged 45 to 64-age bracket,” he said.
“Too much policy focus is on getting younger tenants on the housing ladder. Whilst this is important, the government should also consider the need to provide a home to older tenants who live in the PRS for the long term.
The fact that only a fifth of renters aged 45 to 64 are currently saving towards buying a home suggests they will continue renting for a long time, he adds.
“This has implications for the types of property that this group will live in as they age; for example, there may need to be an increase in one or two-bedroom properties and landlords will need to be open to property adaptions. Ensuring there is a supply of property in the PRS to cater for their needs is vital.”
