It is usually assumed that all parents want to buy their own place as soon as possible. However an Alliance & Leicester survey this week revealed that 55 per cent have no plans to get on the property ladder any time soon. Another 42 per cent would like to buy but cannot afford even to look. Just 3 per cent were actively hunting for a place to call their own. A quarter of those questioned were either renting or living with their own parents.
The problem is only going to get worse in the event of divorce or separation. Many divorced parents (usually the fathers) have to move into rented accommodation but need a place large enough to put up the kids at the weekends.
Stephen Leonard, director of mortgages at Alliance & Leicester, says the trend for family renting will mean the private rented sector will grow up to 39 per cent by the year 2014. "We are currently seeing a shift in our society which will affect the housing market over the next 20 years. The decrease in the number of nuclear families as a result of divorce could mean an increase in the number of rented households with children as our research indicates."
Parents are not renting only out of poverty, however. The survey showed that 6 per cent of prospective first-time buyers think it makes financial sense to have a child before attempting to get on the property ladder.
According to the Abbey National, there are now 17.3 million adults not on the property ladder. Of these, a surprising 6 million said they could afford to buy but did not want the commitment. Renting is clearly becoming an acceptable thing to do, simply to avoid the hassle of house ownership. Parents form a large proportion of the non-owners - some 6.2 million have at least one child.
Despite this clear increase in demand, buy-to-let investors are failing to provide sufficient family accommodation, which is pushing rents for houses up significantly.
One reason for this is that the classic two-bedroom newly built flat is much more affordable for the small investor, and thousands have been built over the last decade specifically to fuel the buy-to-let boom. In some inner-city areas, especially in the North, this has led to over-supply and many landlords have struggled to keep afloat.
According to Nigel Terrington, chief executive of specialist buy-to-let mortgage lender Paragon, most investors are concentrating on student accommodation and, somewhat surprisingly, housing benefit claimants.
"Students offer very big returns of between 15 and 20 per cent, and with benefits claimants you let to the local council, which offers good security," he points out. "The balance of tenants are mostly in the 20 to 30 age group, the Friends generation."
The shift to renting by the 20 to 30 age group happened about 20 years ago, Terrington points out, when a generation of potential buyers were turned off ownership by the property bubble caused by Conservative government mishandling. It left many thousands of mainly young buyers in negative equity and repossessions were rife.
As a result, it is now cool to rent. "We have seen a greater aspiration to rent, especially among young mobile professionals who don't want to attach themselves to a mortgage," Terrington says. "I think there is a big and increasing share of the population who are saying, 'I don't want to own a home', and some are destined to be tenants for the rest of their lives."
People are also cottoning on to the fact that it can be cheaper to rent in the long term. "If you look at the economics it is cheaper to rent, especially now with high capital values and mortgage interest rates going up," Terrington says.
As the current so-called Friends generation grows up and has children, demand for rented family accommodation will increase, but current government policy is creating a shortage of new houses for both owner-occupiers and the private rented sector, and when owner-occupiers bid against investors they always win. The shortage of rented family homes seems set to continue for the forseeable future.Reuse content