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Have young tenants taken over the PRS?

Posted on 2016-03-30

In the last few years the term Generation Rent has started to become ingrained in the nation's psyche. It's been repeatedly used to describe young people who rent a home before taking their first steps on the property ladder.

But is the younger generation really the one that's predominantly renting? Well, a series of reports on home ownership and housing demographics have highlighted that they just might well be...

Who’s renting? What’s the mix?

A report recently released by think tank the Resolution Foundation declared that by 2025, just one in ten people will be home owners.

Since 1998, it says that the biggest decline in home owners is among young families on modest incomes – many of whom will instead have turned to the Private Rented Sector (PRS).

The report suggests that home ownership levels have also decreased drastically among 16-34 year-old households with just 10% of this demographic now owning homes, down from 19% in 1998.

As owner occupancy levels dwindle – so the proportion of private renters increases.

The Resolution Foundation's Living Standards research found that the proportion of under-35s now renting privately has more than doubled since 1998 from 22% to 53%.

This is a sentiment echoed in the latest English Housing Survey (EHS), published in February.

The data for 2014-2015 shows that 46% of 25-34 year-olds are now privately renting, up from 24% just ten years ago.

During the same period, the proportion of 25-34-year-olds buying a home with a mortgage has decreased by a fifth to 34%.

The EHS concludes that 25-34 year-olds are now more likely to be part of the PRS than an owner-occupier, a trend which it says has been building since 2012-13.

There is also evidence in the EHS that more families are renting instead of buying – it reports that 37% of private rented households are families with dependent children, up from 30% in 2004-05.

Is renting becoming the norm?

So we've established that the proportion of renters who are below 35 has increased significantly, as has the proportion of families in the PRS – but has renting become a way of life for these people?

The perception that people rent while they're young before moving on to the property ladder may not be as watertight as it used to be.

We are increasingly being presented with reports which show that tenants like the flexibility renting offers and are frequently reminded of the long-term life rental markets in other European countries.

This year's English Housing Survey also goes some way to suggesting that a shift towards long-term life renting is taking place.

The EHS data shows that the average length of residence for private sector tenants is now four years, up from three and half years in last year's report.

Meanwhile, the graph below shows that out of the three tenure types, private renting is the only one which has grown consistently since the 80s.

HomeLetEHS Graph

Source: English Housing Survey 2014-15

How should agents react?

Well, if tenants are now more likely to be under-35 or young families, landlords will benefit from targeting these demographics and furnishing their properties accordingly.

If agents educate their clients on this phenomenon – these landlords are more likely to have happy tenants, longer-term tenancies and will increase their chances of letting their properties quickly.

Letting agents' role in all this is very important and it's vital that their landlords know what it is younger tenants and families require from a rental property.

It's pretty safe to say that good internet access/Wi-Fi is now one of the top requirements for tenants of most ages, but it will be particularity indispensable for the younger demographic.

Landlords will also need to think about where their property is located and therefore which age group it is most suitable for.

Other aspects of a rental property which vary in importance to different age groups are access to a garden, quality and type of furnishings and selection of appliances.

All these things could be the difference between a landlord reducing void periods, letting for the best possible price and having long-term, happy tenants – so as a letting agent it could pay to bring these issues to the attention of your landlords.

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