For the first time, the number of private renters has now surpassed those in social housing, making them a force to be reckoned with. Over the past thirteen years, the number of households in the private rented sector in England and Wales has climbed from 1.9 million to 3.6 million, an increase of 89.5%. The total number of people living in privately rented homes is now estimated at around 9 million, and Generation Rent puts it in excess of 10 million. This transition has been spurred on by escalating house prices, stagnating wages, an ongoing failure to build social housing and, for some, the impossibility of amassing enough money for a mortgage deposit. With the client base for landlords expanding, it’s more important than ever to understand your target demographic. So just who is Generation Rent?
When we think of Generation Rent, most of us will picture the faces of Generation Y, those unfortunate souls born between the 1st January 1980 and the 31st December 1989. We know that these young people have become caught in the vortex of rising house prices and static wages, making it impossible for them to afford the huge deposits demanded by mortgage companies. With the average age of a first time buyer now standing at 37, they are largely excluded from the housing market, leaving them no recourse other than renting.
However, the increase in private renting is not a discerning phenomenon afflicting only the children of the 80s. As we would expect, the largest rental population is 26-35 year olds, 58% of whom rent. However, 53% of 36-45 year olds also find themselves in this position. In fact, the only demographic with a rental population of below 41% is 18-21 year olds, largely because many still live with their parents and are not yet independent.
In some localities, the average age of tenants actually falls outside the upper bounds of Generation Y. The youngest average age of a tenant is 31 in Northern Ireland, suggesting that, perhaps, it is a little easier for first-time buyers to purchase property in Ireland. On the other side of the coin, the average age in the East Midlands, North East and South East is 35, a year outside of Generation Y, indicating that these are the hardest markets for buyers to break into.
Statistics indicate that the age of the tenants dictates the average term that they will remain in the property. Certainly, tenants are much more mobile than homeowners, with research from 2013 suggesting that families living in rented homes are nine times more likely than homeowners to have moved in the last 12 months. However, this implies a greater transience than we see in practice. In reality, the shortest average term is generally 13.8 months for 18-21 year olds. This is almost certainly attributable to the movement of the student population, where it is common to change rental properties every year based on fluctuating numbers of sharers. The greatest permanence is seen in the 56-65 year old population, where terms of 31.9 months are average.
The age of tenants also impacts how much they will spend on their rent, which is influenced by the average number of sharers and how this will affect their rent share. 46-55 year olds tend to have the highest average rent, of £11,598 p/a. 56-65 year olds search for more economically priced properties, of around £6,870 p/a. However, as the rent will not normally be split between people for this demographic, they actually have the second highest rent share per person. 22-25 year olds, on the other hand, have an average of 1.8 sharers, meaning that they pay much less. It is 36-45 year olds who actually have by far the highest rent share, of £9,250.
Location also has a marked effect on the spending patterns and longevity of tenure demonstrated by Generation Rent. Perhaps the most important factor is that location impacts income, which determines the price of the rental market. This means that there is a marked difference in the average rental price between areas such as Yorkshire and the Humber, where the average tenant income is £22,670, and Greater London, where the average is £37,892, or 67.1% higher. Thus, there is a marked difference between rental prices in these areas. In the former location, the average tenant will pay just £600 p/m, compared to £1,412 in the latter, a 135.3% difference. In the most economical area, the North East, this figure is just £507, or 64.1% less. This difference in income means that tenants in Greater London are willing to spend 103.5% more than in the rest of England, in order to qualify themselves for the most highly paid jobs and a home in the thriving capital.
Location also seems to impact the length of tenure which a landlord can expect. Thus, in Yorkshire and the Humber, the average term is just 19 months, compared to 24 months in the East Midlands, North East and Scotland, locations where, perhaps coincidentally, the average age of tenants seems to be higher. This could suggest a higher proportion of renters with young families, who are less willing to endure the upheaval of relocation.
A Diverse Demographic
These statics provide an interesting insight into the potential motivations of Generation Y, and hopefully a greater understanding of the patterns of behaviour which you, as a landlord, are likely to experience, from the average length of tenure to the likely age of applicants for your property. If you’re wise, take a moment to appreciate the true diversity within Generation Rent – if you can successfully identify the demographic best suited to your property, based on location, budget and size, you can turn renting into a more profitable endeavour for all.
All data from HomeLet Rental Index http://homelet.co.uk/homelet-rental-index/