Renting property Number of households in private rentals set to rise to 5.79m over next five years, with large-scale corporate la
Almost one in four households in Britain will be renting privately by the end of 2021 as soaring house prices and stagnant wages put home ownership out of the reach of growing numbers of people.
Around 5m households, or 21% of the total, are in private rented accommodation, a quarter of whom are families with children. This is set to rise to 5.79m (or 24%) over the next five years, alongside 14.3 million owner occupiers and 4.3 million social tenants, according to an annual report from estate agency Knight Frank. It commissioned a YouGov survey of more than 10,000 tenants and spoke to 26 major investors.
The report says that while at least three-quarters of UK renters are living in homes owned by private landlords, they will increasingly rent from large-scale corporate landlords such as City firms and property companies.
The proportion of households living in the private rented sector has doubled over the last decade, as rising house prices coupled with stagnating wages have put the dream of owning a home out of reach for many, especially the young.
Dubbed “iGens” by Knight Frank, the early twentysomethings have joined “nesters” – couples ranging from millennials to forty-somethings – and 25 to 49-year-old “soloists” and “sharers”, as those who are renting while saving for a deposit to buy a home.
However, renting families, along with 50- to 64-year-old soloists and couples and retired people over 65, tend to spend more than half their incomes on rent. Overall, 40% of renters pay more than 50% of their incomes on rent, the report found.
Not surprisingly, 68% of renters still expect to be living in rented accommodation in three years’ time. The most common reason for renting was saving for a deposit to buy a property, cited by 30%; followed by 21% who said renting allowed them to live in an area where they could not afford to buy; and 18% who said renting was more affordable than paying a mortgage.
Just 8% said they were renting because they did not want the responsibility of owning a home; 6% need the flexibility because of work; 6% are downsizing; another 6% cannot find an appropriate property to buy; and 5% do not want to be stuck in one location.
Young professionals aged 25 to 34 make up the largest proportion of private renters and this is expected to remain the same in 2021 – but they will be renting for longer than now while trying to save enough to buy a home, said Diana Babacic of PRS Research Consultancy, one of the authors of the Knight Frank report. She is also predicting slightly faster growth in the number of renters under 25, as well as an increase in older renters, especially the baby boomers.
With rents rising rapidly in recent years, the key concern for tenants when looking at a rental property is affordability, the report says, although other surveys now indicate that rents are flatlining or even falling. Tenants also pay hundreds of pounds in letting fees every time they move.
Buy-to-let landlords have dominated the market in recent years, but in the past year the introduction of extra stamp duty on second homes and the curbing of mortgage interest reliefs have prompted a number of private landlords to sell up.
Big City investors such as pensions and insurance firm Legal & General have started building thousands of flats for rent around the country in recent years. The first purpose-built rental blocks, constructed by Essential Living, in Archway and Bethnal Green in London are filling up quickly, with rents starting at £375 a week for a studio including utilities, wifi and furniture (there are no service charges or agents’ fees).
The burgeoning “build to rent” sector – professionally managed rental accommodation in purpose-built blocks – is worth £25bn today. Knight Frank reckons this will soar to £70bn by 2021. Just last week, the UK housebuilder Telford Homes teamed up with US residential landlord Greystar to build 894 flats for rent in Battersea in London.
Amid calls for more regulation to protect tenants, City firms L&G, Hermes and M&G, along with property firms Greystar and Grainger, are among those that have pledged to offer three-year tenancies.