There is growing public clamour for the government to tackle the overpriced rental sector, as fresh figures have shown that housing costs for tenants are eating up the majority of their incomes. As such, they are toiling in their efforts to save for homes of their own, giving added weight to fears that rocketing rental prices are “trapping” a large cohort of young people.
Cutting-edge data, entailed within the government’s most recent Housing Survey, shows that private renters are parting with a sizeable 40% of their income on rent, around double as much as a homeowner is parting with on a monthly basis in mortgage repayments. This statistic takes the lower income most private renters receive, when compared with homeowners more substantial paycheques, into account.
The optimism of renters can be admired, as almost two thirds expressed ambitions of owning their property in the middle-to-long term. However, a quarter of renters appeared less sanguine on the matter, admitting they have prepared themselves to be renting for a substantial period of time yet, according to results of the Housing Survey.
The report showed the detrimental effect of 2008’s financial crisis on young people’s home-buying aspirations, as spiralling credit costs and tighter lending procedures from banks yielded a significant decrease in young homeowners. For instance, in 2008, 21% of people taking out mortgages were aged under 35, however this figure sharply declined to 18% by 2012-13. Yet, the number of private renters, during the same period, shot up 14% to 45%.
“It used to be the norm for people in their early thirties to set up a home of their own,” said David Orr, chief executive of the National Housing Federation, “but sadly being ‘priced out’ is rapidly becoming the new the norm.
“With more young people stuck renting privately, they find themselves having to pay rising rents for short-term lets, that offer them no stability or the chance to put down roots for their future. The government must build more of the right homes at the right prices in the right areas, so that we can end this housing crisis in a generation.”
Due to the significant proportion of income spent on rental costs, critics have dubbed the current state of affairs as one of exploitative and ruthless conditions. Calls for greater, speedier house-building projects and various other governmental reforms have never been more vociferous, as fears that an entire generation of homeowners’ social mobility is being severely hampered.
Campbell Robb, chief executive of the housing charity Shelter, said people were “finding themselves caught in the ‘rent trap'”.
“With homeownership now at its lowest level since the 1980s, our shortage of affordable homes is leaving more and more families with no choice by to bring up children in unstable and expensive privately rented homes.”
The notion of great swathes of children living in such unpredictable conditions is certainly cause for concern, as the knock on effects could be harmful on areas such as education, social integration and parental negligence due to alienation experienced as a result of heavy financial costs.
Alex Hilton, director of Generation Rent, stated: “Renters spend two days every week working to pay off their landlord’s mortgage. This is a financial thumbscrew applied to people who simply have no other choice of tenure and it’s hard to see how this can be characterised as anything other than exploitation.
“This underlines the urgency of the need for affordable house-building and tenancy law reform.”
David Orr, chief executive of the National Housing Federation said:
“More and more people on lower incomes now have no choice but to rent in the unstable private sector, paying increasing amounts for the privilege and leaving them little left over for the basics like food and energy bills,” he said.
“To solve this problem and to end the housing crisis within a generation, we must build more of the right homes in the right places at the right price.”
With over 8 million people inhabiting under-occupied homes, amount to 37% of households, and a meagre 15% of private rented homes being unoccupied, the imbalances within the system are undoubtedly stark and the time for governmental reform is nigh.
Homeownership has dropped to its lowest trough in 25 years – the future of our young people depends on what happens next.
Source; Money Expert