The private rented housing sector has grown enormously in Britain over the past two decades, giving rise to the moniker “Generation Rent”, which is now frequently used in the press to refer to the large cohort of people in their 20s and 30s who appear to be stuck as long-term rental tenants with little prospect of ever being able to buy their own homes.
Despite its somewhat derisive implications, the very existence of this term does at least indicate that there is a degree of public awareness of young renters and the predicaments which they face. Yet until now, one other very important group has been largely absent from discussions about the condition of being a renter and the public policy debates which this phenomenon raises: landlords.
Landlords are clearly vital to the private rental market, yet until very recently there was remarkably little data available about who they are and the issues which affect them. However, a new piece of research from the Strategic Society Centre aims to fill in this gap. So, who are private landlords?
Older and Wealthier
The Strategic Society Centre’s report, Understanding Landlords, analysed data from the second wave of the Wealth and Assets Survey, which ran between 2008 and 2010, to investigate the social characteristics of people who act as landlords.
The report contains a number of striking findings. First of all, it revealed how outdated the social stereotype of the somewhat seedy, Rigsby-esque landlord is by showing that today’s private landlords are a remarkably well-heeled bunch. The report’s Executive Summary includes the three following statements:
- “The socio-demographic breakdown of PRS [private rented sector] Landlords suggests they tend to be middle aged (nearly three quarters aged 45-64), married (72%), well educated (two in five have a degree or higher) and disproportionately live in London or the South East (34%).”
- “Three quarters (77%) of PRS Landlords are in employment, mainly in private sector employment. Among employed PRS landlords, median gross monthly earnings is £2400, and 60% of employed landlords earn £2000 or more per month.”
- “Half (49%) of PRS Landlords’ main home is worth £300,000 or more, and half (52%) have a home with four or more bedrooms (owner occupiers only). Over two in five (45%) PRS Landlords have total financial assets worth £30,000 or more, with a quarter (26%) having financial assets worth £70,000 or more. Most PRS Landlords (78%) feel that their income is enough to meet the cost of everyday outgoings.”
Perhaps this is to be expected, given that we are talking about the members of society who have enough spare assets to invest in property in the first place, but their privileged status in comparison to tenants in the private rental sector is another theme that the report emphasises.
One of the report’s most striking statistics is that landlords, on average, have far higher average financial assets than tenants: the median total financial assets landlords are £20,500 compared to £398 for tenants. Again, this might not seem too surprising given that landlords tend to be a bit older than their tenants (nearly three-quarters (73%) of landlords are aged 35–64, whereas over half of tenants are aged 16–34), so to some extent you would expect to see this as a life-cycle effect.
Yet the report also shows that tenants are far less likely to be contributing to savings than landlords: landlords are twice as likely to have made net savings of £5,000 or more in the
past two years. This is worrying, given that there is overwhelming evidence that most young people still want to own their home one day, so you would expect tenants in the private rented sector to be putting more money aside so that they can one day afford to pay for a deposit.
Public Policy Questions
The piece of research raises a number of urgent public policy questions about the role played by the private rented sector in our society. Just from the evidence presented above, it seems worth asking how much of an effect private renting is having on young peoples’ aspirations of home ownership, and whether the system as it stands seems to be facilitating the growth in assets held by landlords at the expense of making it harder for tenants to acquire assets of their own.
Given that the evidence also suggests landlords are a relatively affluent group, it is also worth considering the negative impacts that the private rented sector might have on social mobility.
Alongside the report, the Strategic Society Centre also published a policy briefing entitled Whose Home: Understanding Landlords and their Effect on Public Policy, which echoed some of these questions while also highlighting a specific impact of the growth in renting and the decline of home ownership among younger age cohorts.
This second document emphasises that there is a risk that if a large section of the population is going to be spending their entire lives in the private rented sector then this could be storing up a Housing Benefit time-bomb for a future government to deal with, because it is very unlikely that many of these people would manage to save enough to afford a pension in the current pensions climate which would be large enough to cover their rent, increasing their eligibility for means-tested Housing Benefit when they reach retirement.
The policy briefing even argues that the fact that the more they put aside in private pension savings, the less help they will receive with paying their rent will create a powerful disincentive for lifelong renters to make any pension savings, potentially creating profound implications for government pension policy.
The full implications of having more people renting and fewer people acting as owner-occupiers are clearly only just beginning to be recognised in policy circles, but it will be interesting to see how these debates develop over the coming years. IF will be making its own contribution in the near future with the launch of our study into the favourable tax treatment of landlords in the private rented sector, although all future work in this area has now been significantly enriched by the strong evidence base which the Strategic Society Centre’s new research has given us.