Katie Wells 28th February 2019
“Even though we have been pre-approved for a mortgage, we would need a deposit of £25,000-£30,000 to buy in this area, which just isn’t feasible to save for when we have a 10-month-old baby. It’s sad but true that we are waiting for inheritance money to be able to buy our own house.”
Lauren is 35. She lives in Greater London with her husband and baby and has been living in privately rented accommodation for almost 15 years, since she left university in 2005.
“We plan to own our own home one day, but we are still worried about unachievable mortgage repayments. We are content with renting for now, but even rental prices are becoming silly.”
The number of people privately renting their homes in the UK is ever-increasing. Figures released by the Office of National Statistics (ONS) show the number of households in the private rented sector in the UK increased from 2.8 million in 2007 to 4.5 million in 2017, a 63% increase across households.
Unsurprisingly, young people are the demographic most reliant on the private rental sector. The ONS reports that in 2017 those aged 25 to 34 represented the largest group of private renters at 35%. It is well known that the young people of today face the daunting prospect of “renting from cradle to grave”, as the Resolution Foundation reported in 2018. The soaring of house prices in comparison to the average wages of young adults means the millennial generation are struggling to get a firm footing on the property ladder.
Once people become trapped in the cycle of renting, with ever-increasing rent prices, they’re less and less able to set aside money for a mortgage or a deposit on a house. This is not helped by the fact that many young people face relatively low starting salaries after they graduate, with student debt repayments consuming any extra cash left after rent and necessities. Unable to save for a deposit, young people are forced to continue renting for much of their twenties and early thirties.
But what is more unexpected is the rising number of middle-aged people also privately renting. The ONS’s figures show the greatest change in the demographics of the privately rented sector over the past 20 years is the growth of the proportion of 35-44-year-olds. Rising from 16% in 1997 to 24% in 2017, there are more than three times as many people aged 35 to 44 renting privately than 20 years ago.
This may seem slightly surprising. After all, the old and the middle-aged are often the ones vilified for buying up all of the UK’s housing, leaving younger generations in difficulty. So why are there more and more middle-aged renters in the UK?
Agency workers, the self-employed, not to mention zero-hour contract workers, can have real problems in obtaining a mortgage and are often forced to rent
Dominik Lipnicki, director of Your Mortgage Decisions and a mortgage industry expert, says renting is often the only option for many in the UK, even into their middle-age: “There are many reasons why people are renting in middle age. Property prices, together with stamp duty taxation have resulted in many people being priced out of the property market.
“This is made even more acute by mortgage lenders all wanting the same prime clients, with easily provable income and a decent deposit. Agency workers, the self-employed, not to mention zero-hour contract workers, can have real problems in obtaining a mortgage and are often forced to rent.”
Even for those able to obtain a mortgage however, renting can still be more financially viable than buying a house. While mortgage payments are commonly thought to be cheaper than rent, a study conducted by Zoopla in 2017 found that renting a home is now cheaper than buying in 54% of British cities like Liverpool, Bristol and London.
In addition to expensive mortgage payments, buying a house also comes with hidden related costs like valuation fees and legal fees. Consequently, the growing number of 35-44 year old renters can perhaps be attributed to the fact that privately renting is simply the most affordable option for many in the UK’s current economic climate.
Research backs this up, too. The most recent figures show, on average, full-time workers could expect to pay around 7.8 times their annual workplace-based earnings on purchasing a home in England and Wales in 2017. In stark comparison, 20 years ago in 1997 the average home cost 3.55 times earnings — less than half as expensive as it is now.
These figures highlight how it is harder than ever before to save up for a home of your own if you earn an average or even above-average wage. Year after year owning a home is becoming less of an expectation — a mid-life milestone — and more of an impossibly expensive dream.
Zoe Woodward, 38, lives in Birmingham and has rented privately with her husband for the past seven years. She says she rents primarily because of financial reasons, but that it is also somewhat of a personal choice: “We rent because we came together later in life and aren’t really in a financial situation to buy, but we also aren’t sure we actually want to.”
“We don’t see the area we live in as our forever home, so I think the other reason we haven’t made the effort to buy is in the hope that we may move abroad in the future. If that chance came we would love to be able to immediately take it, so would not want to be tied to a particular place.”
Over the past 20 years, British society has become increasingly dynamic. People like Woodward are no longer content being stuck in one spot for their entire lives and many feel it provides flexibility for those who want to grasp opportunities — whether it be employment or travel opportunities — as soon as they arise.
Many people sell their marital home following a divorce and rent while they find their feet again
Aside from direct financial reasons, Lipnicki suggests that rising divorce rates offer another explanation for the growing number of middle-aged renters. “We are also all too aware of divorce rates in the UK, with many people selling their marital home following a divorce and renting while they find their feet again.”
Divorce often leads to assets being split, so people don’t tend to be in an immediate position to buy a home on their own, and thus turn to renting in their middle-age.
With divorce being one of the primary reasons for the increase in middle-aged renting, it is perhaps expected (though no less worrying) that alongside the increasing number of middle-aged renters there is also an increasing number of single parents in the private rented sector.
In 2017, 35% of one adult households with children were in the private rented sector, compared with 18% in 2007, the ONS reports.
Single parents are reliant on a single source of income to provide for themselves and their children, which makes taking the jump from renting to buying a house all the more difficult.
The total household income of single-parent households is generally lower than that of dual-parent households, which means that banks only offer low lending amounts to single-parents looking for a house.
Banks also tend to offer less favourable interest rates to households with lower incomes, so even if single-parents manage to secure a decent mortgage amount from a bank, the interest rates on the amount might make repayments unfeasible.
The obstacles for single parents trying to buy a home are only worsened by programmes like shared ownership schemes where buyers do not own 100% of the property, which makes it easier for couples, but not single-parents, to obtain good mortgage rates. Hence, many single parents (who are often middle-aged) struggle to afford to buy their own home and turn to private renting as the only solution, especially in the midst of the UK’s current housing crisis.
The rise in the number of single-parents renting is a particularly concerning one as privately renting can lead to all sorts of difficulty and distress for both the parent and any children.
Single-parents have no safety net of another partner’s income. This means that if a single-parent falls into circumstances where they are unable to work for a period of time — such as a bout of ill-health — they might not be able to meet rent payments, and consequently start to amount debt.
The debt cycle
This is a problem that debt advice charity StepChange often sees. Its mid-year statistics update shows, as of June 2018 single parents continue to be its fastest-growing category of clients. In 2017, 27% of StepChange’s clients who both pay rent and are single parents were in arrears. In comparison, within the rest of StepChange’s client base, the number of rent-paying couples in arrears was considerably less at 20%. This highlights how single-parent renters are particularly vulnerable to falling into debt.
Responding to these figures, Peter Tutton, head of policy at StepChange, says: “With an already tight budget, single parents are less able to build rainy day savings to cope with income shocks, and may have to turn to credit to cope with any shortfall.
It is unsurprising that we are seeing growing number of single parents contacting us who are in arrears on their rent
“Difficulty paying rent and other essential costs reflects high rates of child poverty among single parents, which is driven by a number of factors such as insufficient financial support and barriers to work like high childcare costs.
“It is therefore unsurprising that we are seeing growing number of single parents contacting us who are in arrears on their rent.”
Having to pay high rent rates on top of all the necessities for themselves and their children means that single parents all too often experience financial hardship month after month.
In addition to financial instability, families renting (both single-parent and dual-parent) can also create instability in the lives of children. Nearly two-thirds of households in the private rented sector in the UK have spent less than three years there, while only 4% had been in the same residence 20 years or longer, according to the ONS.
Many rental contracts are only short-term — 12 months or less — meaning families repetitively face the prospect of upheaval when contracts come to an end, especially if exploiting landlords decide to raise rental rates. This creates an unfortunate degree of instability in private renting, which can have a particularly damaging impact on the children of renting families.
As the charity Shelter notes, one in 10 renting families has had to change their children’s school due to moving, which causes unnecessary stress and upset for some children.
Moving house has also been shown to have a negative impact on a child’s development. University College London (UCL) conducted a study on how moving home can influence the cognitive development of children. UCL found that children who moved fared worse in verbal ability as well as emotional and behavioural adjustment, than those who did not.
The increase in middle-aged renting, and the related increase of renting families, is therefore a significant cause of concern. Not only is the growing proportion of middle-aged renters worrying because it suggests owning your own home in the UK is now becoming an impossible dream, it is also having an alarming impact on the stability of families and the development of the children of those families.
In the future, most renters will rely on housing benefit to keep a roof over their heads
As well as being an important issue in the present, middle-aged renting will become an even greater issue in the future as middle-aged renters become old-aged renters. Using the English Housing Survey, the organisation Generation Rent has predicted by 2035 nearly one million households of retirement age will be renting from private landlords – a projected increase of 630,000 households from 2017.
Generation Rent says: “If those households owned their home, they would have minimal housing costs by the time they retire. As renters, though, there’s still rent to pay and most will rely on housing benefit to keep a roof over their heads. An extra 600,000 housing benefit claimants would cost the state £3.46bn per year at today’s prices.”
The rise in middle-aged renters will consequently put a strain on the welfare state in years to come, which means it’s imperative that steps are taken now to make housing more affordable for both the young and the middle-aged to put an end to the concept of “renting from cradle to grave” becoming the norm in Britain.
Katie Wells 28th February 2019