29 Aug 2017
‘The bank of mum and dad’ in 2017 to spend £2.3bn on helping the kids pay the rent
Legal & General and Cebr (Centre for Economics & Business Research) have today published a new report on the role the Bank of Mum and Dad plays in helping their children in the rental market.
The research shows the Bank of Mum and Dad will fund £2.3 billion of rental payments in 2017, paying out on average £415 every time a rental payment is made. The Bank of Mum and Dad now helps 9% of renters across the UK with their financial commitments to their landlords on nearly 460,000 properties.
Previous Legal & General/Cebr research showing the Bank of Mum and Dad will support £6.5 billion of lending to first time buyers to get on the property ladder this year means the Bank of Mum and Dad will fund some £8.8 billion in 2017 helping children to either rent or buy a home.
Dan Batterton, Fund Manager, Build to Rent at LGIM Real Assets, said: “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. It is a real challenge for young people who are reliant on parental handouts just to make the rent. The intergenerational inequality that creates the demand for BoMaD funding continues to widen and now it’s affecting renters too. The lack of affordable housing, low wage growth relative to inflation and burdens of student debt mean that many kids can’t even rent somewhere without significant contributions from their family. Parents want to help their kids get on in life, and the Bank of Mum and Dad is a testament to their generosity, but it is also a symptom of our broken housing market.
“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. Renters are currently facing not only expensive rental payments but moving costs, agent fees and deposits which are reducing flexibility – something that should be a benefit of renting.
“Legal & General is playing its part by building and financing thousands of new homes for rent, professionalising the experience for tenants, 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 occupiers. This includes favourable all-in costs, through significantly reduced energy costs, no letting fees, and a number of free services.”
Other key findings from Legal & General’s Bank of Mum and Dad research include:
- The Bank of Mum and Dad will fund £2.3bn of rent payments in 2017
- In 2017, 9% of renters will receive BoMaD financial assistance for their rental payments. 10% of renters have had BoMaD help with their security deposit
- Some parents helped with other rental costs - moving expenses (6%) and letting agent fees (5%)
- With 64% of renters having moved at least once in the past 5 years and home ownership levels under pressure, we can expect BoMaD to play an increasingly important role in the private rented sector
- In 2017, BoMaD has helped pay rent due on nearly 460,000 properties
Unsurprisingly, the Bank of Mum and Dad’s payments to the rental sector are highest in London and the East of England, lending £626m and £604m in these areas respectively. BoMaD also funds £175m of rental payments in the North West and £369m in Yorkshire and the Humber.
Dan Batterton concludes: “The Build to Rent sector is only going to become more important in the UK’s housing mix. We need to be able to offer young people a good selection of affordable options for rental properties – either for the long term or as a step to buying their own home. Institutions like Legal & General can regenerate not just residential housing, but the towns and cities in which the homes are built. Infrastructure, jobs and local economic growth are all key to creating thriving communities where people want to live.”
L&G is involved in housing creation across the spectrum, backing a fast growing pipeline of over 70,000 new homes over the next five to ten years and looking to help provide the UK’s population with high quality, affordable living at all stages in their life cycle. Forming an important part of this, its Build to Rent fund is creating quality rental stock that offers a positive choice for elective renters through high service levels and flexible lease structures. Focused on key urban regeneration areas centred around transport hubs, it is targeting schemes of over 150 units, taking advantage of economies of scale to deliver better value and more choice for its residents, whilst building sustainable, vibrant communities. It currently has 1,500 build to rent homes under construction, in planning or now being occupied by residents in Walthamstow, Leeds, Bath, Bristol, and Salford.
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Legal & General Capital
A natural evolution and fit for its multi-tenure housing investment strategy, Legal & General has been involved in supply side housing activities for nearly 20 years. These include:
- Bringing housing back to the centre of the UK’s cities through large scale regeneration, such as Salford, Plymouth, Liverpool, Bracknell, Newcastle and Canning Town
- Its stake in house builder CALA Homes, which is on track to deliver an annual revenue exceeding £700m in 2017 (versus £241m revenue in 2013)
- Legal & General’s acquisition of Inspired Villages Group, a best in class operator and developer of later living accommodation. Creating around 3,000 new, quality homes over the next five years, its aim is to become a leading later living housing operator
- Legal & General’s total investment capability for the Build to Rent (BTR) sector currently stands at circa £1 billion. It has secured over a 1,500 homes under construction or in planning, with sites in Bristol, Salford, Bath, Leeds and Walthamstow, and has a pipeline of over 2,600 additional future projects
- Delivering its first new housing community on a 250 acre site in Crowthorne, Berkshire, Legal & General Homes is set to deliver 1,000 new homes, a primary school, care home, community facility and a 140 acre nature reserve
- Revolutionising the construction industry through its Leeds modular housing factory
It is also a significant investor in social housing, care homes and student accommodation. This holistic approach provides Legal & General with the mechanisms to deliver high quality returns throughout market cycles by pivoting investment to where the need is greatest.
Legal & General Mortgage Club
- Legal & General Mortgage Club is the largest mortgage distributor in the UK.
- The Mortgage Club offers thousands of mortgages, insurance and protection products. By providing a variety of housing services/ offerings from New Build, Later Life Lending, Conveyancing, Buy to Let, Surveying and more.
- It is involved in more than one in five of all mortgage transactions in the UK and is the longest running club of its kind in the UK.
- Legal & General Mortgage Club facilitated £29bn of mortgages in H1 2017 (H1 2016: £26bn) through strong partnerships with top lenders and over 10,000 mortgage brokers
LGIM Real Assets
LGIM Real Assets is a division of Legal & General Investment Management (LGIM), one of Europe’s largest institutional asset managers and a major global investor. LGIM manages £951.1bn in assets on behalf of over 3,200 clients (as at 30 June 2017), providing products and solutions spanning all asset classes. LGIM Real Assets, headed up by Bill Hughes, has AUM of £24.9bn (as at 30 June 2017), actively investing and managing assets across commercial property, private residential, infrastructure and property lending and, most recently, corporate credit.
Legal & General Group Plc
Established in 1836, Legal & General is a leading provider of insurance, savings and investment management products in the UK. The Group has a market capitalisation of £15.7bn (as at 22 August 2017) and is responsible for investing £951.1bn worldwide (as at 30 Juner 2017) on behalf of investors, policyholders and shareholders. Legal & General has over seven million customers in the UK for life assurance, pensions, investments and general insurance plans and over one million customers in the US who rely on us for life assurance.