The extent of the renting crisis among young people in the UK has been made clear following a detailed report by economists at accountancy firm PricewaterhouseCoopers (PwC).
And, unfortunately, it looks like more than half of 20 to 39-year-olds – a.k.a. ‘Generation Rent’ – will be forced to privately rent by the year 2025.
But, how has this generation come about – after the great home-ownership boom of the 80s – and how do things really look for the future of renting and home-ownership for young people?
In the 1980s, under Margaret Thatcher, thousands got the chance to own their own homes for the first time by taking advantage of the Tories’ popular Right-to-Buy scheme which was introduced as a way to fulfil Britain’s housing aspirations. Supported by the extensive liberalisation of the financial sector, mortgages were made much more widely available.
The result? The number of people living in rented accommodation fell quickly from 33 per cent to 25 per cent and the number of home-owners with mortgages rose from 32 per cent to 41 per cent by the end of the decade.
However, flash-forward to 2003 and the deregulation of the mortgage-lending business under Thatcher helped to set the wheels in motion for the great global financial crisis which later ensued.
The report details how average first-time buyer deposits have increased almost five-fold since the late 1990s – from £10,000 to a staggering £50,000 – meaning renting is the only option now for an increasing number of young people who simply cannot afford to buy.
Senior PwC economist, Richard Snook, described how a decade of soaring house prices before the crisis, and lower loan-to-value ratios after it, mean the deposits needed by first-time buyers has risen significantly.
He added: “As a result, a generation of private renters have emerged and this will increasingly be the norm for the 20 to 39 age-group.”
The rise in average deposits now far exceeds the growth in average earnings and this trend now threatens to lock young people out of the housing market because of middle to low incomes, coupled with there being higher-priced areas such as London, Oxford, and Cambridge.
Since 2000, PwC found the number of people aged 20 to 39 living in private rented accommodation has jumped from 20 per cent to an incredible 50 per cent.
Based on the firm’s analysis, this trend looks set to continue. Where 2001 saw 2.3 million households rent, as of 2014, this number rose to 5.4 million and now, by 2025, PwC estimates this figure will swell to 7.2 million.
Around half of 20 to 39-year-olds are already in the private rental sector and the firm says this will become a clear majority – unless there is a reversal in affordability and housing supply trends.
Unlike Germany and Switzerland, which have large numbers of renters due to higher quality properties with longer term tenancies than in the UK, Britons, unfortunately, do not have the same level of tenure security and properties are not always of the highest quality either, says the report.
If the UK followed suit, perhaps the renting culture would be better, but the report found there was little sign of this having happened over the past ten to 15 years, therefore, this looks likely to happen for a few more decades yet.
Chief PwC economist, John Hawksworth, rounded-off by giving a pessimistic view on the renting crisis in the UK and said: “We expect housing supply shortages to persist for at least the next decade and, realistically, expect to see a continuing rise in ‘Generation Rent’ until at least 2025.”
Director of the campaign group Generation Rent, Betsy Dillner, described how high prices are leaving people in rented accommodation struggling to save for the future and warned the Government to “have a plan B.”
She added: “The longer they fail to act, the more renters they’ll have to answer to.”
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