Landlords within the private rented sector already provide crucial housing for the country’s tenants, and it seems a lot of ‘generation rent’ may be staying put for longer.
The term ‘generation rent’ often comes hand-in-hand with negative connotations of a group of people priced out of homeownership and ‘stuck’ renting or living with their families for longer than ever.
However, there is another way of looking at it, with many of today’s tenants enjoying the benefits of living with friends, normally in locations that are more desirable than they may be able to afford to buy, and with the flexibility of being able to move house easily and cheaply compared to if they owned the property.
Of course, for those that do want to get onto the property ladder, some parts of the UK are proving inaccessible for the vast majority of under-40s, with London and the south-east in particular offering the least affordable housing markets. As such, growing numbers of young professional buyers and renters are looking elsewhere.
Whatever people’s reasons for renting, it is clear that the UK’s growing private rented sector is providing much-needed homes for around 20% of households in the country. As such, landlords are an integral component of the housing market for generation rent.
Generation rent shunning homeownership
According to a survey from finance firm Together, one in five respondents “have never intended to apply for a mortgage”, while a study from Zoopla found that 42% of generation rent (aged 18-39) say they have given up on the idea of buying one in the next 10 years. This demonstrates the long-term need for rental homes in the UK.
Cost is the biggest reason for members of generation rent to avoid the property ladder, according to Zoopla, with 64% citing the cost of living crisis as their top reason for not buying a home in the next 10 years. Just over half (51%) blamed increasing house prices, and 49% said it was due to higher mortgage rates.
As mentioned above, location is another barrier for many, with Zoopla finding that the average prospective first-time buyer having to move around 37 miles from their current home in order to afford to buy.
More than a third (37%) of non-homeowners say they would like to buy a property where they grew up. But only 27% of people in the south west say they could afford to buy a home where they grew up, while 33% of people in the south east said the same.
Landlords plugging the gap
Despite the difficulties faced by the buy-to-let sector in terms of tax changes and rising mortgage rates – which are affecting the whole housing market – appetite for property investment is still high in leading areas of the UK. This is partly down to the ongoing strength of the rental market, and high demand from tenants.
With generation rent potentially growing in number, and getting older, this presents a number of opportunities for landlords. Void periods are lower during times of heightened demand for homes, meaning that less money is lost in between tenancies. There is also evidence that more tenants are now renewing rather than moving.
Rents are also continuing to increase across most of the UK, led by the likes of the north west, and the average UK rent is now 5.5% higher than it was 12 months ago. There are also plenty of new opportunities for investors looking at city centre apartments, which have come back into favour for many tenants.
The government is consistently being urged by many in the industry to do more to incentivise landlords, in order to allow them to provide an ongoing high quality level of housing in the places where generation rent needs it the most.