A third of millennials face the prospect of renting for their entire lives, due to growing inter-generational inequality. The findings, from the Resolution Foundation, warn that unless reforms are introduced to tackle Britain’s housing crisis, a generation of young people may never get onto the property ladder.
The report notes that 40 per cent of those aged 30 lived in rented accommodation, whereas 10 per cent of the baby boomer generation (often the parents of these millennials) rented at the same age.
Millennials, those who were born between 1980 and 1996, face a much greater challenge to buy their first home compared to previous generations, reflecting the fact that house prices have rocketed over the past couple of decades.
Government incentives are in place to help first-time buyers, including Help to Buy, the Help to Buy Isa and the Lifetime Isa. But in areas where property prices have risen enormously, such as London and the South East, millennials typically do not earn enough to pass the affordability tests to secure a mortgage.
At the end of 2017, for example, the average property in London had a price tag of £496,000, while the average salary (across all age groups) stood at £34,200. Over the past 15 years the gap between earnings and house prices has almost doubled.
The Resolution Foundation notes that as millennials reach their ‘child-rearing years,’ it is likely that more and more children will be brought up in rented accommodation. It adds that 15 years ago the number of children in owner-occupied housing outnumbered those in the private rented sector by eight to one. That ratio has now fallen to two to one as a record 1.8 million families with children rent privately, up from just 600,000 15 years ago.
The report adds: ‘If home ownership growth follows the weak pattern of the 2000s, up to half of millennials could be renting (either privately or in the social rented sector) in their 40s, and a third could still be renting by the time they claim their pensions.
‘This rising share of retiree renters, coupled with an ageing population, could more than double the housing benefit bill for pensioners from £6.3 billion today to £16 billion by 2060 – highlighting how everyone ultimately pays for failing to tackle Britain’s housing crisis.’
The Resolution Foundation has called for more support from the government to help ‘Generation Rent’, including the introduction of better protections for those who rent, such as rent controls. The think tank also calls for more affordable homes to be built.
Keep up to date with all the latest personal finance news and investment tips by signing up to our newsletter. Email subscribers will also receive a free print copy of Money Observer magazine.
Subscribe to Money Observer Magazine
Be the first to receive expert investment news and analysis of shares, funds, regions and strategies we expect to deliver top returns, plus free access to the digital issues on your desktop or via the Money Observer App.Subscribe now