Housing’s intergenerational divide is reaching a tipping point

Dan Wilson Craw, Communications Manager at the campaigning organisation Generation Rent, explains the destabilising trend of the growing rental market and spreads the word about their Rent Freedom Day on 4 FebruaryIF_Blog_Generation_Rent_logo

There are few parts of British society where the intergenerational divide is starker than housing.

Every month the average private renter says goodbye to 40% of her pay cheque in one go. That money ends up in the bank account of her landlord. Every year across England this monthly outgoing amounts to £35.6bn being paid to landlords (calculation on the English Housing Survey (EHS) figure of 4m households and the Valuation Office Agency (VOA) mean rent of £742).

When you consider that 73% of private renters are aged under 45 and 78% of landlords are aged over 45 (according to the EHS and the Association of Residential Letting Agents (ARLA)), that is a colossal, systematic transfer of wealth from young to old.

The shift towards rent

Twenty years ago, the average 30 year old would still be making a large monthly payment, but it would be paying for an asset he got to keep and live in once paid off. Today’s 30 year old will never see that money again, and because rents are so high and prices bounding ever higher, the savings she needs to put a deposit on a house grow less achievable every month. In 25 years she could still be paying rent and funding a retirement that she won’t be able to enjoy.

Home ownership isn’t even the be all and end all. If renting was cheap, decent, professionally managed and secure, there’d be less demand for home ownership, less house price inflation and less speculation on the housing market by people who could afford it.

Some landlords want to provide their tenants with a home at a reasonable cost, but others are in it for the simple reason that there is no better investment. They will raise the rent at every opportunity and forbid decoration and pets in case they decide to sell. The mortgage broker Paragon found that since buy-to-let lending started in the 1990s, landlords have enjoyed an average of 16.3% profit every year through rent and capital gains. They get the advantage of being a speculator in a politically endorsed asset bubble, and the advantage of being a business, with all the tax breaks that come with it (as the Intergenerational Foundation laid out in 2013).

Despite the government’s talk about helping first-time buyers, the housing minister also wants a “bigger” private rented sector – and is resisting regulation and reforms that might discourage landlord investment. Ministers are also about to unleash millions of pounds into the property market by liberalising private pension pots – money that is likely to create another cohort of retired buy-to-let landlords and destroy another cohort of first time buyers who’ll be forced to keep renting.

The voting power of the rental sector

But by pandering to the property owning majority, successive governments have sown the seeds of an eventual policy reversal. Private renters now number 10 million across the UK and, according to ComRes polling, 35% are likely to be swing voters. There are 86 parliamentary seats where there are potentially enough private renter swing voters to overturn the incumbent MP’s majority. The outcome of the General Election could well hinge on what parties offer the propertyless.

Another 65 seats have more renters – in the private and social sectors – than they do homeowners, and Generation Rent forecasts that this number will rise to 104 by the end of the next Parliament. That’s 104 MPs whose constituents actively do not want rising house prices.

The current situation has never been sustainable, but now it is getting less politically tenable too.

Join ‘Rent Freedom Day’

Generation Rent is taking that message to Westminster on Wednesday 4 February by organising Rent Freedom Day and we want you to join us. With the support of other campaigns and organisations including the Intergenerational Foundation, we’re organising a mass lobby of Parliament, a hustings with the main political parties and a series of talks and workshops for private renters who are fed up and want to take action.

Rent Freedom Day is free to attend and is the last opportunity before the General Election to tell politicians how important it is to fix the housing market so that it works for the propertyless as well as the propertied.

Full details are available here and you can register to attend here.