The harsh reality of the UK’s sometimes savage housing market is that more people are renting their homes until later in life but paying more for the privilege of doing so than their parents did.
In England the number of private renters has increased from two million to 4.5 million between 1999 and 2015 while renting a home has been eating up a steadily increasing proportion of renters’ income, rising from 8% during the late 1960s to over 27% today, on average. Here we look at the key trends driving up rents across the nation in recent years.
1. There are more landlords
There has been a huge increase in the number of landlords and the number of homes bought by them to rent out, restricting the supply of available homes to buy for first time buyers.
This boom can be traced back to 1996 when the main lenders in the UK decided to make mortgage credit more available to landlords.
Helped by today’s historic low interest rates, this has persuaded many people that becoming a landlord can be a sure-fire way to make money. There are now approximately 1.5 million landlords in the UK according to a research by Homelet.
As a percentage of housing stock, privately rented homes have risen from 9.4% in 2000 to 19% today, an increase of 125%. It is easy to see why many would-be first-time buyers say they are squeezed out of ownership by the very landlords they pay rent to.
2. Houses are more expensive
The increase in the number of landlords buying up homes coupled to historic lows in house building has pushed up house prices dramatically in recent years and made it too expensive for millions of people to buy their first home. Since December 2008 the average house price has risen from £159,000 to £222,000 today.
The resulting increase in the number of people renting has increased competition for rented homes and helped push up prices, particularly in London and the South of England. For example, in London analyst Hometrack says rents have increased by 45% over the past ten years, while salaries have increased by only 25%.
3. Fewer affordable homes are available to rent
Government research shows that the proportion of council and housing association homes rented by families fell from 36% in 2005 to 32% in 2015, while the proportion in the private rented sector increased from 30% to 36% over the same period.
This is because fewer councils are building new affordable homes for tenants. There are 400,000 fewer homes available for social tenants than ten years ago.
4. Not as many homes are being built
For over two decades successive governments have failed to tackle one of the key problems within the housing market – that there aren’t enough homes being built.
The number of new households being created each year has outpaced the number of new homes being built every year since 2008, the government’s own data shows. This is because the number of new homes that need to be built each year is between 230,000 and 300,000 a year and yet the current annual run rate stands at just 140,000 a year.
5. The government's priority for affordable housing has shifted
During 1990s the government introduced a scheme of quotas for property development that set a percentage of new homes on a site to be built and then let to residents at affordable rent.
But recent Conservative governments have been slowly dismantling this system of affordable homes creation as politicians focused on providing affordable homes to buy, rather than rent. In London, for example, the average affordable quota for developments was just 22% across all the city’s boroughs, research by bank BNP Paribas revealed recently.
6. It’s more difficult to get a mortgage
If you’re young and looking to get your first mortgage then almost everything is conspiring against you – it’s why so many people remain renting for so long.
After the 2008/9 global financial crash the UK government introduced much tougher mortgage lending criteria including much higher mortgage deposits and stricter affordability rules. This, coupled with higher house prices, means first-time buyers are either rejected for a mortgage or, it was revealed recently, must save up a deposit of £32,899.
Francesco is a freelance digital marketer