Generation Rent is the term used to define a particular demographic in our society that, due to high house prices and rents, are unable to save for their first home. They are those who are currently trapped in the Private Rented Market, struggling to save for their first deposit due to relinquishing a large proportion of their income on rent each month. They are those who are left to await the impending wave of wealth inequality that will reward those who were fortunate to have the economy on their side when they bought and it will punish those who do not have that privilege for no fault of their own.
Since 2001 the amount of households in the Private Rented Sector has more than doubled, whilst home ownership has reduced. This was when Generation Rent was created, as illustrated in the table below.
But what are the reasons for the Rise of Generation Rent? One of the main reasons is that we are just not building enough homes in the UK and have not been doing so since the 1970’s. This has created a backlog of under-delivery in a country with a rising population. Economics 101 tells us that if demand is greater than supply that prices will rise and thats exactly what has happened (amongst other complex factors, such as greater availability of finance). The below table demonstrates how many homes (or lack of) we have been building over the last few decades in the UK.
Another scary observation from the above graph is that social and affordable housing delivery has reduced significantly over the decades which has caused a multitude of problems such as a ballooning welfare bill and a rise in homelessness.
One of the key reasons for the reduction of house building since the 1970’s is because public bodies stopped building homes, hoping that private developers would step up to fill the gap – well that was a mistake… It turns out that private developers would prefer to control supply in order to maintain higher sale prices – who would have known…?
The effect of a lack of supply has boosted house prices – this was great for those who already own, who became wealthy without doing anything. Bad for those who don’t own, as house prices have risen much faster than inflation and wages, which means that most homes are now out of reach for first time buyers if you can’t rely on the bank of mum and dad to give you a leg up. The below illustration shows the price of daily goods today if they rose by the same amount as house prices.
£50 chicken anyone?
It shocks me when people (especially those in public office or those who already own) say that in the UK we are “obsessed” with owning our homes in the UK. No sir, we are not obsessed with owning a home, we do however care about creating financial security for ourselves as it is clear that you can make more money by sitting on your ass than by going to work.
So now we know what Generation Rent is and the key factors of why we are in this f***ed up situation. But what can we do? Well you can endure the Private Rented Market and share with strangers or friends, stay in a cheap place with no hot water and only a little bit of mould or you could force yourself into a relationship in order to split the rent – there’s an app for that… Tinder and Grinder can help.
Yea, I may be exaggerating but it makes the point that in order to save for your first home you will have to sacrifice a few years, everyone has to do that right? But are we sacrificing more and for longer than past generations?
Other alternatives available to Generation Rent are to make the most of the vast amount of affordable and intermediate housing products on the market. Most of which are not actually affordable… This will be summarised in a future blog and has been covered brilliantly in the Priced Out report by IPPR.
What did I do? I bought house boat in London with my partner in order to escape the Private Rented Market. A bit excessive, yea, but damn it has been fun.
I also set up RenKap – a development company which focuses on delivering 100% intermediate precision manufactured homes for aspiring 1st time buyers in London. If they don’t build it for us, then we will have to.
Stay tuned for more housing critique and insights.