• Cost of renting over a lifetime set to increase to £64,400 for those starting their rental journey this year; 22 per cent more than current FTBs
• Two fifths of tenants don’t think they will ever be able to afford a home
• ARLA launches ‘Cost of Renting’ report, compiled with CEBR

 

On the day of the reports launch its findings were covered by the BBC, the Financial Times, The Times, the Guardian, the Independent and the Daily Mail.

 

The report’s author, Senior Economist Nina Skero was interviewed about the cost of renting for London’s first time buyers by BBC London News.

 

 

A first time buyer (FTB) purchasing their first house this year will have spent £52,900 on rent1 by the time they get on the first rung of the ladder, and future FTB’s can expect to spend 22 per cent more, according to Association of Residential Letting Agents (ARLA) Cost of Renting report.

 

Compiled with the Centre for Economics and Business Research (Cebr), the report reveals the average FTB in England in 2016 will have spent 16.4 per cent of their total lifetime earnings on rent for all the years they were a tenant.

 

Those buying a property for the first time this year in the North East will have spent £31,300 on rent – the lowest amount in England. Whereas in London, the average amount spent is more than double that, at £68,300. The South East is the only region other than London where the total lifetime rent spent is above the English average – where the total rent expenditure equates to £55,900.

 

Last year alone (2015), on average people in the UK spent 22 per cent of their wages on rent, increasing to 30 per cent in London. Those living in the East enjoyed the most affordable rents due to relatively high earnings in the region, yet rent still accounted for 18.9 per cent of their disposable income.

 

Rising rent costs and future homeowners

 

Brits that move out of their family home at the age of 183 , will typically rent for 13 years before buying their first property. The Cost of Renting report found those leaving home and starting to rent this year, will spend an average of £64,400 before they are able to buy their first property – one fifth (22 per cent) more than current FTBs getting on the housing ladder this year will be spending. Those leaving home and starting to live independently in London will continue to be worse off, as they will spend an average of £91,500 on rent before they can buy their first home – £23,100 more than those buying in the capital this year.

 

David Cox, managing director, Association of Residential Letting Agents (ARLA), comments on the findings:

 

“The rising cost of rent in this country is a huge issue, and is preventing tenants from being able to save to buy a home. Our Cost of Renting report reveals that tenants are already spending a significant proportion of their income on rent, and therefore struggling to save any money. However, as house price affordability worsens and interest rates start rising, more pressure will be put on renting with weekly rent likely to rise, so home ownership will remain out of reach for many.

 

“Rents are becoming alarmingly unaffordable due to the lack of available housing; the North-South divide we’re currently seeing in the UK is a clear illustration of this. The London rental market is competitive, with far more prospective tenants looking for properties than actual houses available. This is pushing up rents in the capital, which will continue to put pressure on surrounding areas, including the South East, as Londoners relocate to avoid high rent costs.”

 

A nation of forever renters

 

A fifth (21 per cent) of those renting in the UK do not expect to ever be able to afford to buy a home – with rising house prices and low wages forming a barrier against FTBs getting on the property ladder3 . Still, younger generations feel optimistic, with three quarters of those aged 18-34 (75 per cent) hoping to buy in the future.

 

This optimism wanes with age as only half (48 per cent) of 35-54 year old renters have plans to buy in the future. Nine in ten (87 per cent) tenants feel they are being held back from being able to buy. Saving for a deposit is the biggest obstacle, with over half (51 per cent) claiming this is stopping them. A quarter (23 per cent) would not be able to afford monthly mortgage repayments and a further quarter (26 per cent) cannot afford the associated costs such as stamp duty.

 

Renting satisfaction

 

Although two fifths of UK renters (39 per cent) are quite happy renting, the majority are not. Spending income on rent rather than being able to save is a problem for two fifths of renters (38 per cent), and a quarter (26 per cent) think the government should do more for renters to help them get on the property ladder. One in ten (8 per cent) feel there are not enough family homes available to rent in the area they want to live.

 

David Cox concludes: “It’s really worrying that so many renters don’t ever expect to be able to afford a home. Although housing is high on the political agenda, all we’ve seen come out of parliament recently is legislation which is set to hinder the experiences of tenants; and the sheer lack of affordable housing means many renters will never fulfil their dreams of homeownership. Despite the Chancellor’s efforts in the Budget to help the housing market, the housing budget accounts for just 0.26 per cent of public spending, lower than other key areas, such as transport which accounts for 3.6 per cent of total spending. “As rent costs continue to rise, unfortunately more and more tenants will find themselves renting for longer as they have less ability to save. We need to take action now, before we become a nation of forever renters.”

 

A copy of the full report via the ARLA website is available here.