15:54 PM, 20th June 2011, About 11 years ago 1
High housing costs are hitting ‘Generation Rent’ hard, leaving them struggling to make ends meet. When utility bills, council tax and insurance are taken into account, individuals renting in London are left with as little as 25 per cent of their net income after housing costs. With little spare cash available, this generation is exposed to rising living costs, and unable to save for the future.
In a survey carried out by YouGov for Chartered Institute of Housing (CIH), 21 per cent of respondents overall said they were spending more on running their home than they could afford – equivalent to just over 10 million people in the UK. The proportion of people paying more than they could afford increased for respondents living in private rented homes – 31 per cent.
Research by CIH and Hometrack revealed that renting on your own is almost as expensive as mortgage repayments on an equivalent property, leaving the renter struggling to save for a deposit. With typical deposits for first time buyers standing at about 20 per cent, this can mean that first time buyers will need to find a lump sum of between £18,376 in Northern Ireland and £58,788 in London.
Those who rent on their own with no other cash injection, and save only the difference between renting and mortgage payments towards a typical 20% deposit, would need to save for tens or, in theory, hundreds of years to save, putting home ownership beyond their reach. This position is set to be worsened with gas and electricity bills on the rise again in 2011, further reducing single people’s disposable income.
Renting is currently between 83 and 100 per cent as expensive as the repayments on a mortgage on an equivalent property, according to figures compiled by CIH and Hometrack based on two-bedroom dwellings. In the North East of England and the West Midlands, renting was actually more expensive than mortgage payments. In city centres, rental prices can reach much higher levels.
In order for single renters to save up the deposit for a typical 2 bedroom dwelling over 5 years, they would have barely enough to live on to cover essential living costs. In Scotland and the East Midlands, single renters would be left with £484 per month for living costs, and only £112 per month in the South East.
Sarah Webb, CIH Chief Executive, said: “We already know that the deposit barrier means more people are becoming part of ‘generation rent’ whether they want to or not. As demand for housing continues to massively outstrip supply the cost of renting a home is also increasing, and we need to understand much more about what this means for households and the wider economy. More and more people are struggling to meet their housing costs, let alone save for a deposit. We need government to recognise how unaffordable housing costs are for many people, not just in terms of becoming a homeowner, but covering day-to-day essentials. If people are to save for a rainy day, avoid reliance on the public purse, put money into their local economy, and avoid ill health caused by financial worries and unsuitable housing, we need national action to improve affordability across the housing market.”