We’ve heard a great deal about generation rent in recent years but what does it actually mean for consumers and advisers and has the face of the typical renter changed? The picture is certainly more diverse than it used to be.
Home ownership has fallen to 64%, according to the Resolution Foundation1. The reasons are many but it seems, just as Margaret Thatcher severed Britain’s dependency on social housing in the eighties, the market crash of 2007 has, at the very least, dented our passion for home ownership. The number of households living in privately rented accommodation has more than doubled since 2001 and this trend is likely to continue2. Getting a mortgage is a more onerous process than it used to be, deposits required are larger, meaning significant sacrifice and commitment and in the background average house prices continue to rise. Add a more mobile jobs market to that mix and it’s no wonder many opt to rent.
What does this mean for advisers?
Well, with change comes opportunity and renters do present a protection opportunity. Admittedly, not all of them but there’s definitely a core of fairly affluent renters, some with families who for whatever reason are choosing to rent. How would they be placed in the event of an interruption to income? Are they likely to be speaking to advisers? Probably not. Some may have gone online or spotted a leaflet in the supermarket that’s triggered them to sort out some cover but without advice, it’s highly unlikely they’ll have enough of the right cover. So they’d probably have to rely on the State. What could they expect? – as a famous magician once said, ‘not a lot’.
Welfare reforms have been well documented and those changes are likely to impact renters who find themselves at the mercy of the state. There’s a few things that might impact access to benefits. Firstly, the benefits cap sets a limit of £20,000 for households outside of London3. Then there’s means testing and the introduction of Universal Credit. Most benefits are now means tested so if there’s any savings the state will expect people to live on them. There is of course the bedroom tax so for a couple renting a two bedroom property, any housing benefit will be reduced because they only need one bedroom4. The picture is further complicated by age; if your client is a single renter under the age of 35 they will normally be given housing support based on the cost of shared accommodation, so they’ll get the price of a room, not a property5. And the rates for support are set at the 30th percentile which means they are based on below average rental costs in any area6. So basically anyone renting who suffers an interruption to income is likely to struggle to pay the rent should their income be interrupted. That can be particularly problematic if tied into a lease agreement.
No-one likes to give up their independence to move back in with the parents, and it’s not always possible anyway so speaking to renters about their protection needs is absolutely an opportunity to create new clients. And for those with aspirations to buy, well they’ll have expert advice, from a professional they now know and trust.
Source2 - UK housing market outlook: the continuing rise of Generation Rent
Source4 - https://www.citizensadvice.org.uk/benefits/help-if-on-a-low-income/housing-benefit/housing-benefit-restrictions-for-social-housing-tenants1/housing-benefit-size-restrictions-in-social-housing/