29 Aug 2017
Young adults can't afford to leave home, even to rent
LGIM Real Assets’ BTR Fund Manager, Dan Batterton, discusses the role that the Bank of Mum and Dad is playing in the UK rental market.
New research from Legal & General and Cebr (Centre for Economics & Business Research) shows the Bank of Mum and Dad will fund over £2.3 billion of rental payments in 2017, paying out on average £415 every time a rental payment is made. Legal & General has been tracking the role of the Bank of Mum and Dad for some years now – but this is the first time we’ve looked at its role in the rental market and the results are concerning.
The Bank of Mum and Dad now helps 9% of renters across the UK with their financial commitments to their landlords every month. This is in addition to the £6.5bn that the Bank of Mum and Dad will pay out towards deposits for houses, and other costs associated with buying a home. So renters are currently facing not only expensive rental payments but moving costs, agent fees and deposits. All of this is reducing their flexibility – something that should be a major benefit of renting. This means for those children whose parents can’t give them a lump sum hand-out, they may not be able to afford the initial costs associated with moving into rental accommodation even if they could subsequently make the monthly payments. It is not acceptable that younger generations cannot afford to rent without needing help.
The UK is experiencing a supply-side crisis in the rental sector. We need more professional, affordable tenures and more choice for renters. We need to build more homes for the young, old and families alike – more quickly and cost effectively.
Legal & General is playing its part by building and financing thousands of new homes for rent, professionalising the experience for residents, so that they can be assured of quality, transparency and surety of tenure. By controlling all aspects of design and service, and taking advantage of economies of scale, we can deliver better value for money and more choice for our customers. This includes favourable all-in costs, through significantly reduced energy costs, no letting fees, moving costs and a number of free services such as free wifi and top quality furniture and white goods. You can see this in action at our first Build to Rent scheme which we launched early this year in Salford, The Slate Yard: www.theslateyard.com
The Build to Rent sector is only going to become more integral in the UK’s housing mix. Therefore we need to be able to offer young people and adults alike a good selection of affordable options for rent that can offer them a positive lifestyle choice in an area that they actually want to live. For too long renters have found themselves at the mercy of expensive moving fees, unresponsive managers, and private landlords who often want to minimise upkeep costs and maximise rents. This cannot continue and we need to provide UK residents with the housing they deserve.