Generation Rent is a symptom of Britain’s broken housing market.
But how can we help Generation Rent to become Generation Buy?
While some younger buyers are lucky enough to get financial support from the Bank of Mum and Dad to help them buy a home, there are millions of individuals underserved by the mortgage market who are stuck in a cycle of renting.
The government has declared its intention to transform Generation Rent to Generation Buy through initiatives such as its new 95 per cent mortgage guarantee scheme.
But many individuals will still struggle to meet the rigid lending criteria of the UK’s mainstream high-street banks because they’ve experienced real-life problems, such as divorce, job loss, a drop in income or a credit blip.
Other borrowers include “non-vanilla” customers with more complex circumstances, such as the self-employed and workers in the gig economy that simply do not match the traditional credit scoring techniques of many lenders.
While a great deal of people happily choose to rent, for the growing number of people who do want to buy a house, these factors alongside rising house prices, stagnant incomes and the increasing cost of living have put homeownership beyond reach.
And it’s not just those in their 20s or 30s who are falling foul of the rigid lending criteria and escalating house prices.
Research has shown that Generation Rent spans all ages. In 2017, more than a quarter of those in their mid-30s to 40s were renting, compared to fewer than one in 10 in 2000, according to the Office for National Statistics.
Individuals aged over-55 who have long aspired to own their own home and key workers such as nurses and delivery drivers are also finding homeownership an unachievable ambition.
The onset of the Covid-19 pandemic has only served to exacerbate these struggles further, with peoples’ finances affected by furlough and a sudden loss of income or job security a reality for many.
With an uncertain future ahead and concerns over financial security growing, the number of people falling into the Generation Rent bracket is set to grow as more people across Britain start to feel the economic shock of Covid-19.
The trouble facing Gen Rent
There is no denying the fact that Generation Rent has been hit hard by the coronavirus pandemic. Yet even before Covid-19 struck, the UK’s housing market was facing an affordability crisis.
Homeownership was already in decline - the number of households owning their own home fell in 2016 to its lowest level since 1986.
According to Vida’s research, a fifth (18 per cent) of renters said that even before the crisis they struggled to find a lender that was willing to give them a mortgage.