Nearly half of Londoners are living in rented accommodation and this will surely increase according to study.
On the basis of current trends, the Centre for Housing Policy at York university estimates that by 2040 up to one-third of 60-year-olds will rent privately. Government data show that at present just 4 per cent of pensioners and 8 per cent of those aged 55 to 64 live in privately rented accommodation.
The proportion of 25 to 34-year-olds who rent privately has been stable at about a third over two decades but has risen notably for 35 to 44-year-olds, from 16 per cent to about 25 per cent now. Young people also spend more on housing costs (a third of their income on average, the Resolution Foundation reports) than did youthful baby boomers (a fifth) and the rent they pay will often go directly to the pension income of their retired landlords.
A government survey of English private landlords updated in January shows six in 10 landlords are 55 or older, a third are retired, and the most common reason for being a landlord was for pension purposes (59 per cent).
Generation rent, mainly the under-40s, are unlikely to be able to pass on the costs of their own retirement to the generations following them in quite the same way. Even if they can afford a home of their own, tax changes in 2016 have made it less attractive to buy another property to rent. The government has switched from subsidising buy-to-let landlords, who do not expand the overall supply of property, to encouraging institutional investment in build-to-rent (BTR) development. It didn’t have to push hard as money was already headed to that sector, seeing the attraction of a diversifying asset offering a rising income and the potential for capital gain. Legal & General already has 11 BTR schemes in operation or development, the latest in Brighton.
Tenants in a BTR development will typically pay an 11 per cent rental premium, according to analysis by JLL, a property consultancy. At least they may be contributing to their own generation’s pension prospects rather than those of current retirees. Julie Rugg and David Rhodes, of the Centre for Housing Policy, question the lack of transparency on the level of government support for BTR.
Building more social housing would be a better way to help generation rent. A cross-party commission on social housing convened by housing charity Shelter after the Grenfell Tower fire in London in June 2017 said the decline in social housebuilding over four decades was behind many of today’s housing problems. It called for a 20-year programme to build 3.1m more social homes, as well as more immediate reforms to address problems in the private rented sector. Lower housing costs would give a big boost to the pension prospects of generation rent.