Renting ‘unaffordable’ for many families, think-tank warns

Families on lower incomes cannot afford to privately rent a modest home in a third of Britain’s local authority areas and councils need to act to mitigate the problem, the Resolution Foundation said today.

The think-tank’s Home truths report found that low interest rates and rising demand for privately rented property means rents are more expensive than equivalent monthly mortgage repayments in almost half (45%) of the country. 

Across Britain, around 1.3 million families on low and middle incomes are grappling with unaffordable housing costs, the study says.

Vidhya Alakson, deputy chief executive of the Resolution Foundation, said there was an ‘urgent need’ to provide more affordable housing for families on low and moderate incomes.

‘Only an increase in the stock of housing for rent can improve the situation and the government should make this a strategic priority,’ she said.

The foundation urged local authorities to take a more active role in providing affordable housing for their communities. Earmarking some residential land for private rental development only, rather than for construction of homes to sell, would be helpful.

In 125 of the 376 of local authorities studied, rent on a two-bedroom property would take up more than 35% of the net income of a family earning £22,000 a year. This is in excess of what is generally considered affordable. In 38 of the 376 authorities, rental costs would consume more than half their monthly net income.

Families whose income is £19,000 are priced out of almost half of the areas in Britain, the report said. Assuming the family has a moderate income of £28,000 a year still leaves one in six council areas unaffordable for private rentals.

Affordability problems were not just confined to London and the Southeast, the Resolution Foundation said. Affordability ‘black spots’, where private rents exceed 35% of the net income of a low-earning family, include Aberdeen, Exeter, South Cambridgeshire and Warwick.

Shared ownership and social rent were found to be the most affordable types of housing tenure. However, less than 2% of households live in shared ownership housing and access to social housing is heavily restricted.

At the national level, the Resolution Foundation said the government should continue helping the development of a new build-to-rent housing sector. This could increase private investment in purpose-built rental homes, and would offer secure tenures and better quality management.

Older generation rents for life as under 25’s stay at home for longer

Key points:

• 6% year-on-year growth in the number of tenants aged over 50
• 7% year-on-year decline in the number of tenants aged under 25
• Average length of tenancy increases to 19 months
• Average rents rise 1.2% year-on-year, with Scotland seeing the greatest increase

Older generation: Analysis from Countrywide plc, the UK’s largest lettings agency, shows a growth in the number of tenants aged over 50 living in private rented accommodation in Q2 2013. Most regions saw a rise in the number of over 50’s renting properties with East of England and East Midlands recording the greatest increase at 3% year-on-year, followed by Wales and London up 2%.

Younger generation: The under 25 age group saw an unexpected 7% decrease in the number of tenants renting properties through Countrywide in Q2 2013 compared to 2012. Weak wage growth and the rising cost of living is likely to be behind the younger generation moving back into the family home after university to save for a deposit to buy their first property. The significant decline in tenants aged under 25 is greatest in Wales where there has been an 8% decrease, followed by the South West and East of England (-3%) and South East (-2%).

Length of tenancy: The average length of tenancy is now 19 months in the UK, a slight increase on 2012.  Central London has the highest length of tenancy at 22 months and Wales the lowest at 14 months. . 

Table A:  Mix of age profiles of tenants renting in England, Scotland and Wales

Region	June Year-to-Date	Under25	25 to 30	31 to 40	41 to 50	Over 50
Greater London	2012	10%	31%	41%	11%	6%
	2013	9%	30%	36%	17%	8%
Central London	2012	18%	18%	44%	12%	8%
	2013	17%	23%	34%	17%	10%
East of England	2012	18%	26%	26%	18%	12%
	2013	15%	24%	28%	17%	15%
South East	2012	16%	24%	27%	18%	14%
	2013	14%	24%	31%	18%	13%
South West	2012	20%	26%	25%	14%	15%
	2013	17%	24%	25%	16%	18%
East Midlands	2012	21%	28%	26%	14%	10%
	2013	21%	28%	21%	17%	13%
West Midlands	2012	23%	30%	25%	13%	9%
	2013	22%	32%	24%	13%	9%
Wales	2012	23%	24%	25%	15%	14%
	2013	15%	31%	25%	13%	16%
North East	2012	19%	25%	31%	14%	11%
	2013	17%	28%	26%	17%	12%
North West	2012	21%	27%	25%	15%	12%
	2013	21%	27%	25%	15%	11%
Yorkshire	2012	24%	29%	21%	13%	13%
	2013	24%	31%	25%	11%	10%
Scotland	2012	20%	27%	27%	14%	12%
	2013	20%	27%	28%	14%	11%
Mix grand total	2012	19%	27%	27%	15%	12%
	2013	18%	27%	26%	16%	13%
Underlying year-on-year decline / growth in mix		-7%	1%	-1%	5%	6%

Average rents and yields by region: The Countrywide Quarterly Lettings Index also showed that the average monthly rent increased 1.1% year-on-year in Q2 2013 to £845pcm. Scotland saw a 6.7% rise in average monthly rents in Q2 2013 compared to Q1 2013, the greatest increase of any region. Yields remain strong across England, Scotland and Wales with Wales seeing the highest yield at 6.6%, followed by Midlands (6.5%) and North (6.4%). Arrears fell on average by 0.8% year-on-year but increased in Scotland 2.4% and Wales 2%.

Table B: Variations in rents, yields and arrears data in England, Scotland and Wales

Region	Average  Rent Q2 2013	Average Rent Q1 2013	Average Rent Q2 2012	Yield %	Arrears 30 days (% rent roll £)
Greater London	£1,110	£1,107	£1,096	6.20%	7.10%
Central London	£2,398	£2,387	£2,486	4.80%	7.30%
East of England	£821	£814	£788	6.20%	6.90%
South East	£1,058	£1,054	£1,079	5.90%	5.10%
South West	£739	£745	£737	5.70%	4.50%
Midlands	£640	£636	£627	6.50%	6.10%
North	£624	£603	£599	6.40%	6.40%
Scotland	£619	£580	£594	5.80%	6.90%
Wales	£623	£618	£624	6.60%	9.10%
Total	£845	£835	£836	6.10%	6.30%

Commenting on the Index, Nick Dunning, Group Commercial Director at Countrywide plc, said:

“Renting a property was previously a choice for the younger generation as they saved for a few years to get on the housing ladder.  However, there is currently a demographic change in the UK rental market with people renting for longer and in some cases for life. Reasons vary and for some it is because they cannot afford to save a deposit to buy their own home but others choose to rent and enjoy the flexibility it gives them especially in terms of job mobility. Tenants aged 41 and over now equate to nearly a third (29%) of all of those renting a property through Countrywide in England, Scotland and Wales and this figure is likely to rise in the future.”

“Renting is a flexible and relatively hassle-free way of living which suits many people's lifestyles. It allows them to settle in a location where perhaps they couldn’t afford to buy but they enjoy living in.  However, with a growing population of lifetime renters and more 18-25 years olds having to live with their parents for longer because they cannot afford to rent or buy, increasing the amount of good quality, affordable rental accommodation is needed to meet this demand. With banks making it easier for landlords to offer longer tenancies, more competitive buy-to-let mortgage products available and demand for rental accommodation outstripping supply, now is an ideal time for landlords to expand their portfolios and provide a more diverse range of affordable rental properties. ”   

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