Over half UK homes rented by 2032 if current trends continue, research shows
Over half of UK homes will be rented by 2032 for the first time in 60 years if current housing trends go unchecked, according to a new report from the Intermediary Mortgage Lenders Association.
Since 2007 the private rented sector has grown from 14% to 18% of households while owner occupation has dropped from 68% to 64% and social renting has also fallen.
This has happened with buy to let mortgages financing just 420,000 or 32% of the additional 1.31million houses in the private rented sector since 2007, with the remainder made up of cash or commercially funded purchases and properties rented out by their existing owners.
The IMLA report identifies multiple trends driving the rise of private renting by creating extra demand, including the fall in social housing; growing obstacles to home ownership; changes in the employment landscape; greater numbers of students; high levels of immigration; later marriage and rising separation rates.
It emphasises that failing to increase UK housing supply in line with population and household growth is the major cause of first time buyer frustrations and the heightened sense of competition for buying homes.
Low interest rates and quantitative easing have also advantaged landlords, with financial regulations such as limits on interest only mortgages adding to the obstacles facing would be home owners.
Demographic projections point to rapidly rising housing demand, with the UK population expected to reach 67.8 million by 2020 and 75.3 million by 2035.
If current trends continue without a major policy or economic shift to address the shortage of new homes, the majority of UK households will be renting in the private and social sectors by 2032 for the first time since the early 1970s with home ownership increasingly the preserve of the old.
The continuing fall in owner-occupation and decline of social renting would also mean more than a third of households renting privately within two decades, twice as many as today.
Home ownership is already lowest among younger generations and this effect will gradually move up the age brackets, as more people struggle to buy in their 30s and beyond. Between 1991 and 2012/13, home ownership among 16 to 24 year olds in England dropped from 36% to 11% while among 25 to 34s it fell from 67% to 40%.
‘There are many misunderstandings clouding the growth of buy to let, including its impact on first time buyers. This report is a fresh look at how and why the private rental sector has grown. It asks important questions about our current direction of travel and the failure to build enough homes to support the rising population,’ said Peter Williams, executive director for the IMLA.
‘Growth of the private rented sector has been from a historically low base and has been fuelled by strong underlying demand. If current trends continue then demand for private rented property is likely to drive further expansion and increase the burden on our already overstretched housing stock, at a time when first time buyers are also feeling the pressure of new mortgage market regulations,’ he explained.
‘Pressure is likely to grow for planning restrictions to be relaxed to support a large increase in new building and address the chronic failure to keep up with housing demand. The inescapable conclusion is that we need a proper joined up strategy to adequately serve owner occupiers, tenants and landlords, and put an end to key forces pulling in opposite directions,’ he added.