Why rent is higher today than in previous generations
In today’s society and competitive housing market, we find more people than ever are renting until much later in life, and whilst doing so are paying more for the privilege than their grandparents and parents did back in the day. Between 1999 and 2015, the number of privately rented properties in England over DOUBLED, increasing from 2 million to 4.5 million. Even more of a whopping increase is the amount of monthly income rent consumes for tenants. This has risen from being just 8% of a renter’s monthly income in the late 1960s, to now over 27% on average.So, what exactly is it that has been pushing rent up over the years?
1. More landlords, more properties!Buying to let has seen a huge increase in popularity over recent years, with landlords snapping up properties up and down the country. This in turn has massively decreased the amount of homes available to first time buyers. This big buy to let boom traces back to 1996, where we saw UK lenders made a conscious effort to make mortgage credit more readily available to landlords. Considering this, and with the helping hand of today’s lower than low interest rates, many people have been actively encouraged into becoming landlords with the assurance of a healthy profit. According to Homelet, there are now around 1.5 million landlords in the UK alone. Going on the percentage of housing stock, this equates that privately rented properties have seen a massive increase of 125% since the millennium. With figures like this, it’s not hard to see how first time buyers feel squeezed out of ownership by the very landlords they pay their rent to.
2. House prices have risen With more landlords than eve, coupled with an historic low in the amount of house building, house prices have shot through the roof in recent years and made it too expensive for million of people to buy their first home. The average house price has risen from £159,000 in 2008 up to £222,000 today. Because of this, more people are renting, and this has in turn increased competition in the renting market, pushing up prices. These price increases have been felt most in London and the South of England. To put the price increases into perspective, London analyst ‘Hometrack’ have stated that in the past ten years, rents have increased by 45%, whilst salaries have increased by only 25%.
3. There aren’t as many affordable homes available to rentAccording to Government research, the percentage of council and housing association homes rented by families fell from 36% in 2005 to 32% in 2015. All the while, the privately rented sector increased from 30% to 36%.This is due to fewer councils building affordable homes for renters. Statistics show that ten years ago, there were 400,000 more homes available for social tenants than there are today. This has pushed those families who would have rented through the council into private renting.
4. There aren’t many new homes being built Though it may seem as though there is a lot of activity in new house building, there still are not enough homes being built. Due to Government data, the increase in population numbers and the number of new households being created each year has massively outpaced the number of new homes being built year on year since 2008. The number of new homes that need to be built each year stands at around 300,000 yet the current annual rates stands at a mere 140,000. A demand this high for homes in general has naturally increased their value and cost to rent.
5. The Government no longer prioritises affordable housingIn the 90’s, the Government had a scheme that saw house-builders setting aside a percentage of new homes on every new development, especially for those tenants in need of affordable rent. However, recent conservative governments have changed these schemes, and the focus has been put more on making those houses more affordable to buy rather than rent.
6. Getting a mortgage is more difficult than ever As many first time buyers will know, it’s not easy to get a mortgage. This is why so many people remain renting for such a long period of time. After the financial crash in 2008/9, the UK Government raised the bar on mortgages, making it tougher than ever to acquire one. The mortgage lending criteria required buyers to put down significantly higher mortgage deposits whilst also introducing stricter affordability rules. Recent statistics have revealed that the average first time buyer must save up a deposit of £32,899. This of course, makes renting a much easier option.