Home is where the heart is unless, of course, you happen to be one of the millions of people currently renting privately in England or Wales in which case home is, often, a source of pain and frustration.
As any one of this country’s 5 million renters (many of whom are actually families and not young graduates as popular myth would suggest) knows, the housing crisis is very real, very serious and here to stay. All it takes is spending more than a year of your life at the mercy of a landlord’s whims to get a sense of how completely dystopian, messed up and borderline feudal our housing situation is.
Desperate millennial cries of ‘I’ll probably be renting forever’ have long been dismissed as hyperbole by the property-owning generations but, today, a report has confirmed that up to a third, or 40%, of millennials are likely to be renting for their entire lives.
This has come about for several reasons. House prices risen far beyond inflation, outstripping what people on average incomes earn. More than this, the increase in the number of buy-to-let landlords that we have seen in recent years and the lack of regulation when it comes to how much they can charge has both inflated the market and meant that many people have become caught in a cycle of renting because, put simply, their rent takes up so much of their income. Indeed, the average renter now pays 27% of their gross salary to their landlord unless, of course, they live in London in which case it’s 49%.
The Home Improvements report from the Resolution Foundation is touting the ever more likely reality that we will become a nation of ‘cradle to grave renters’. It says that 40% of those born between 1980 and 1996 would be living in rented housing by the age of 30. To put that in context, it’s more than the next generation above, Generation X, who were born between 1965 and 1980.
Home ownership is now so expensive that swathes of young people (i.e. the ones who cannot access the Bank of Mum and Dad) simply cannot get the funds together unless they completely change their lives and gear everything towards saving. It goes without saying that if those on middle incomes can’t make it work, anyone earning around the national average of £27k or less is between a financial rock and a hard place. Indeed, the Resolution Foundation note that a record 1.8 million families with children now rent privately, this is up from 600,000 15 years ago.
Laura, 32, told The Debrief that she has ‘completely given up on buying a house’. She is from Middlesborough and currently living in London with her partner where she earns an above national average salary. However, despite this, she cannot save ‘unless she stops going out…eating or breathing’ because the majority of her income goes on rent.
‘I earn good money’ Laura explained ‘but it still doesn’t go very far when you factor in travel, food, rent and bills. It means any money left over should go into my savings but I keep thinking if I can’t enjoy it now while I don’t have kids then what’s the point’. Laura says that the amount she would need to save for either Shared Ownership or Help to Buy, let alone outright ownership, ‘is so much that there’s no point’.
Her situation will be familiar to many Londoners where the average price of a one bedroom flat is now roughly £500,000. A 5% deposit of £25,000 would allow Laura to purchase such a property but, in order to cobble this together over the next five years she’d need to be putting away £416.67 a month. Taking her other outgoings into consideration, this just isn’t possible.
Beyond London this problem, albeit slightly less acutely, persists. Laura Ellen is 31 and lives in Buckinghamshire. ‘I've been renting for the last ten years or so’ she told The Debrief ‘but I'm pretty much at the point now of thinking I'd much rather live my life, have nice things, go on holiday etc. than save’. The more unrealistic buying a home becomes, Laura says, the more she has made her peace with renting. ‘I probably could just about scrimp and save for a deposit to buy’ she said, ‘but I'd have to buy a small place and I don't want to have to do that. To make it would I would have to move to another part of the country!’.
In Manchester Ellie, 27, is also struggling. ‘I have a decent salary’ she explained to The Debrief ‘but saving up a big enough deposit is a challenge with rent prices so high’. Ellie has actually managed to save enough for a small deposit and has a mortgage agreement in principal but it has proved not to be enough. ‘I am struggling to find many properties in Manchester that fall within the price range’ she told The Debrief, ‘and whenever I think I have found one I read the small print and it is "For investment purposes only, 50% deposit required" which is very frustrating as they seem to be the only reasonably priced properties. It seems like investors get put first’.
Meanwhile, Kate who is 26, earning £26k and currently working and renting in London, is contemplating leaving her job in order to move to Manchester in an attempt to save money. ‘Buying [in Manchester] still wouldn’t be an option’ she explained ‘but at least rent would be cheaper and I wouldn’t have to live in a shared house anymore and might mean I could start saving’.
Like the other young women, Kate has decided that it simply isn’t worth living a hermetic existence in an attempt to pursue a financial goal when the finish line keeps moving as house prices go up. ‘Don't get me wrong’ she said ‘having savings is important and I have learnt the hard way what it’s like to not have them! but saving every penny and not being able to enjoy the money I work hard for? I don't think that's good for your overall wellbeing personally!’.
The term Generation Rent is slightly misleading. It has long been lackadaisically applied to avocado-eating selfie-taking millennials, implying that only young people who can afford exotic fruit are affected by the housing crisis. That simply isn’t true, many of those who rent are families with children and, in any case, those who are young now will one day be old and the fact that they don’t own their own home will become a serious problem.
The Resolution Foundation’s report acknowledges this and the urgent need for action. ‘Policy makers need to radically reform the private rental sector’ they have said ‘to make it fit for raising children and retirement because a generation of young people face the prospect of never owning their own home’.
All of this, the Resolution Foundation says, could see housing benefit costs spiral out of control. The report notes that if home ownership growth follows the weak pattern of the 2000s, up to half of millennials could be renting (either privately or in the social rented sector) in their 40s, and a third could still be renting by the time they claim their pensions.
If Generation Rent retire without assets, as it’s looking likely many of us will, the Resolution Foundation calculate it could ‘more than double the housing benefit bill for pensioners from £6.3bn today to £16bn by 2060 – highlighting how everyone ultimately pays for failing to tackle Britain’s housing crisis’.
The problem we face is not the fact that so many of us will be renting into old age in and of itself. The issue is that the private rental sector, as it stands, is unfair and expensive, mostly working in favour of landlords and not tenants. Just one example of this imbalance can be found in a report The Debrief recently conducted into the various ways in which landlords are exploiting tenants for their deposits. If renting was a more viable long-term housing option, we wouldn’t be facing such a large-scale ticking housing time bomb.
However, despite their pessimistic findings, the Resolution Foundationare confident that the housing crisis could be prevented from turning into a disaster if politicians take action to make renting a) more affordable and b) more secure. They say that we need the following:
‘The introduction of indeterminate tenancies as the sole form of contract in England and Wales, following Scotland’s lead and the practice in Germany, the Netherlands, Sweden and Switzerland.’
‘Fair balancing of the needs of tenants with the rights of landlords. A landlord could remove a tenant that fails to pay the rent or treat the property well, or if they wishes to sell or reoccupy the home, but cannot simply end the tenancy at short notice without good cause.’
‘Light-touch rent stabilisation that limits in-tenancy rent rises to CPI inflation for three-year periods.’
‘A new housing tribunal, to ensure landlords and tenants can have disputes resolved swiftly.’
Long-term tenancies that people can actually afford? A dispute system that actually works? Renters’ rights? Now, that all sounds pretty sensible, doesn’t it? As renting become the new normal, such common sense suggestions will become increasingly hard for politicians to ignore.
Follow Vicky on Twitter @Victoria_Spratt
This article originally appeared on The Debrief.