Does ‘generation rent’ want to become ‘generation buy’?


Prime Minister Boris Johnson has promised to help more people get onto the property ladder. But is there more to ‘generation rent’ than an inability to buy?

In a speech earlier this week, the prime minister vowed to turn “generation rent into generation buy“. He added that the government would carry out the biggest expansion of homeownership since the 1980s. Vowing to “fix our broken housing market”, Johnson wants to transform the planning system and bring in state-backed 95% mortgages for first-time buyers.

Over the past decade, the average age of a first-time buyer in the UK has risen from 31 to 33 years old. According to the latest Ministry of Housing data, homeownership among 25 to 34-year-olds dropped from 55% to 38% over the same period.

Lack of affordability is often cited as a primary cause of this fall. As of June, Land Registry figures show the average home in the UK now costs £237,963. This is up from £173,417 in 2010, which is a 37.2% increase.

The shift to renting: more than money

Over the first 15 years of the 2000s, the number of private rented households in England more than doubled. One report from the English Housing Survey shows there are now around 4.55 million households renting privately. Interestingly, though, the age group that has seen the biggest rise in renting is the 35 to 44-year-old bracket.

While many people do still aspire to own a home one day, it has become less of a priority. Increasingly, people are ‘settling down’ later, and renting rather than owning gives them greater flexibility.

One survey from Knight Knox showed that more than a quarter (26.1%) of people rent “because it suits their lifestyle”. This was even more likely to be the case among 18 to 24-year-olds. In this age group, almost half (47.2%) of respondents said they didn’t want to be tied down to a location.

Over-55s who continue to rent also enjoyed the way it fit better with their lifestyle (34.7%). Around a quarter said they didn’t want to maintain a property, and a similar number did not want a mortgage.

Andy Phillips, commercial director at Knight Knox, said: “It’s fascinating to see that a lot of people are now renting out of choice rather than necessity. It indicates that renting is more suitable for the current market and it will be interesting to see if this trend continues.”

Improvements in the private rented sector

The UK’s private rented sector (PRS) has undoubtedly upped its game over the past couple of decades. Increased regulation, while not always popular, means there is more accountability.

For example, houses in multiple occupation (HMOs), which may once have been associated with tenant and landlord issues and poor quality housing, are now a much more up-market lifestyle choice among renters. Large HMOs require compulsory landlord licences, while smaller HMOs are subject to more rules now.

Build-to-rent is another sector which is changing the reputation of renting. These purpose-built rental units are geared specifically towards tenants, with added amenities such as dedicated workspaces and social areas. This helps to create a sense of community, so ‘generation rent’ can feel just as settled as homeowners.

Co-living or flatsharing is becoming increasingly popular among older people as well as young. One study from Built Asset Management showed a 136% increase in co-living enquiries from couples between June 2019 and June 2020.

Alex Gibbs, co-founder and director of Built Asset Management, said: “Economic factors are undoubtedly at work, with co-living offering an affordable option to renters seeking high-end accommodation, without the expense that comes with a single-let unit.

“However, co-living has also undergone something of a revolution in recent years, with an influx of luxury properties onto the market.”

Help for first-time buyers

Over recent years, the government has brought in a number of measures to help first-time buyers. Stamp duty relief for this buyer group has been in place since 2017, for homes under £300,000. Other schemes such as Help to Buy have also helped many new buyers onto the housing ladder.

The latest promise to help ‘generation rent’ hasn’t been fleshed out yet. The idea behind Boris Johnson’s plans seems to involve a state-backed 95% mortgage for first-timers with small deposits. This would make it easier for those on lower incomes in particular to afford a home.

At present, most banks are unwilling to lend on such high loan-to-value terms due to the risks involved. They are also a much more expensive option for borrowers who are able to get them.

David McGrail, compliance director at First Mortgage, commented: “The 95 per cent loan-to-value mortgages dropped away particularly because of concerns about the job market, unemployment and property values. But if the government steps in and offers that protection it will make a big difference.

“It’s only a risk if the property market falls or property prices plummet. But considering the situation, these are good times and the market is going really well at the moment.”

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Does ‘generation rent’ want to become ‘generation buy’?


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