Are young people being priced out of rental properties?

young people renting more

A lot has been made over the past few years of the fact that less and less young people are ‘getting on the property ladder’ in the UK. With house prices concurrently rising with the cost of living, and a shortage of housing throughout the country, young people are being portrayed by many media outlets as being ‘pushed out’ of the housing market; a generation of people desperate to own property but who will never have the resources to do so.

It’s the perfect media narrative for troubled economic times, a time when families are being forced out of the capital because house prices and rent have become too expensive. The narrative, however, might overlook one crucial factor – that young people in Britain no longer want to buy property.

20 years ago, it would have been sacrilegious to even make such a suggestion. Property ownership has been a part of the British psyche for generations, a minimum goal to be achieved by any respectable adult.

As with many aspects of society, though, we now appear to undergoing a radical shift in thinking with more and more young people choosing to rent for the long term. Part of the reason for this, obviously, is the massive boom in house prices since the early 1990s; the average cost of a home in 1993 was £63,000. In 2013, it has more than doubled to £173,678.
This has led to over half of British under-35s living in a rented home, according to survey by LV, a figure often quoted when painting a ‘doom and gloom’ picture of the housing market.

It isn’t that figure which presents the greatest insight into the younger generations’ mindset, though. The fact that two out of five young people have no interest in buying a home and that 42% of rentees aren’t bothered about buying a home (even though, in some cases, they could afford) gives a much more interesting picture of the current state of the housing market and a suggestion of where attentions should possibly be focused instead.

The rent boom

Currently, the government is attempting to help ‘Generation Rent’ onto the housing ladder with their Help to Buy scheme, which offers loans to homeowners willing to pay a 5% deposit. It’s an attractive scheme, no doubt, but one that might not actually be properly addressing the concerns of young people.

A much more concerning prospect is the increasing price of rent, and the relative lack of accommodation for young people looking to rent. The cost of renting has risen over 40% in some areas over the past two years, squeezing youngsters fresh out of university or school out of areas they perhaps grew up in.

These price increases have occurred as landlords have realised the profit potential of the growing rent market. The rent rises show no sign of stopping either, with Oxford Economics suggesting there will be hikes of 5% each year until 2020.
Conversely, the increasingly appeal of rental properties for those looking to make their fortune in property is also driving up the cost of a home for first time buyers. The homes traditionally favoured by first time buyers – relatively cheap in semi-decent areas – are being snapped up by landlords with more capital and financial clout. This means many with the intention of buying are being left to pay extortionate rent.

As rents rise, there is also a concern about the quality of properties on offer for renters. In Oldham, for example, there are plans for single room apartments that are smaller than squash courts. In some areas, companies are renting homes from landlords and letting agents and dividing the house up into separate rooms, loaning out single rooms to separate tenants.

Renting a home, while the preferred option for many young people, leads to life of uncertainty and a lack of control over their housing situation. If rents continue to rise as they do, we’ll see more and more young people unable to rent and unable to buy a home. As society’s attitude towards property shifts, surely this is where the government’s attention needs to be focused?

Author: Christopher Smith is writing on behalf of Shepherd Gilmour Properties.

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