While most private renters in the UK aspire to buy property, the reality is that many people simply cannot afford to get a foot on the housing ladder due to high house prices, with many people, particularly millennials, set to rent for the rest of their lives.
With the number of new homes being built across the UK still significantly below the level needed to meet demand from buyers, Britain’s housing shortage has now reached crisis point, with the number of prospective renters also dramatically outweighing the volume of homes on the market.
The latest figures from ARLA Propertymark show that the supply of homes available to rent dropped last month, while demand from renters hit a near 12-month high, and this trend looks set to continue moving forward, as reflected by the slump in the UK home ownership rate, owed largely to fast rising house prices and pitifully meagre wage growth since the financial crisis.
Owner occupiers in the 35-44 age group, for instance, has fallen from 71.6% to 52.4% over the last 11 years, while private renters have increased from 11.4% to 28.5% over the same period. Social renters in this age group have risen slightly over the same period from 17.0% to 19.1%.
But the housing market is simply not prepared for the growing numbers of life-long renters as the number of new-builds coming onto the market remains significantly below the rate required to meet demand, according to DJ Alexander.
Aside from the low number of new homes coming onto the market, the property management firm points to the fact that many buy-to-let landlords are contemplating leaving the property market due to recent government changes to the financing and regulation of the sector, which is also having an adverse effect of rental supply.
If the private rented market shrinks while social housing growth remains relatively flat there is a risk that the much larger number of life-long renters may find their options limited by a lack of housing stock.
David Alexander, managing director of DJ Alexander Ltd, said: “The BTL market has become much tougher in recent years with changes to affordability, access to finance, and a reduction in the tax benefits of property investment.
“All of this has led to a softening of the market and the option for many landlords of either leaving or contemplating leaving the marketplace.
“The result is potentially a fall in the number of private rental properties available although this will be different across the UK with some rental markets stronger than others.
“Therefore, many life-long renters, of whom there are a growing number in their thirties and forties, may find their choice limited by a smaller marketplace.”
With a growing number of life-long renters emerging there is going to be an increasing need for more social housing, more private renting, and more affordable homes across the country, according to Alexander.
He added: “The government and local authorities need to work together with the private sector to ensure that we have a sufficient housing stock to serve the changing needs of the UK population.”
“This means the freeing up of more land in areas where demand is high for property development, a steady and continuing programme of social house building, the encouragement of the private sector to build more homes in areas of greatest need, and the encouragement of a strong and vibrant private rented sector.”