Wednesday 22 June 2011

Home ownership out of reach for millions of Britons as Generation Rent takes hold

As more households become part of "generation rent", high housing costs are leaving individuals with little spare cash to make ends meet, leaving them exposed to rising living costs and hitting their ability to save for the future.
When utility bills, council tax and insurance are taken into account, individuals renting in London are left with as little as 25% of their net income after housing costs. 
In a survey carried out by YouGov for the Chartered Institute of Housing, 21% of respondents overall said they were spending more running their home than they could afford - equivalent to just over 10 million people in the UK.
A higher proportion of people living in private rented homes (31%) said they were paying more than they could afford.
People living in Yorkshire and Humberside are most under pressure, with 32% struggling with housing costs, and people aged 25-34 (27%) and those with children living in the household also finding it hard to cover the cost of running a home (26%).
Research by the CIH and Hometrack to explore this problem showed that renting on your own is almost as expensive as mortgage repayments on an equivalent property, leaving little scope to save up for a deposit.  With typical deposits for first-time buyers at 20% of purchase price, this can mean finding a lump sum of between £18,376 in Northern Ireland and and £58,788 in London.
Single renters who have no other cash injection and save only the difference between renting and mortgage payments towards a typical 20% deposit would take tens or in theory hundreds of years to save, putting home ownership beyond their reach.
And with gas and electricity bills on the rise again in 2011, single people’s disposable income will shrink further.
According to figures compiled by CIH and Hometrack, renting is currently between 83-100% as expensive as the repayments on a mortgage on an equivalent property, based on two-bedroom dwellings likely to appeal to first-time buyers.
In two regions, the North East of England and the West Midlands, renting was more expensive than mortgage payments. In city centres rental prices can reach much higher levels, with individuals paying a significant premium to live close to their place of work.
If single renters tried to save up the deposit for a typical two-bedroom dwelling over five 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 in the South East £112 per month.
CIH Chief Executive Sarah Webb 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."

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