For generations parents have been helping their children get a head start in life, from assisting in university fees to saving for weddings and chipping in for house deposits, there is no doubt as to the pivotal role many play in giving their children a boost in early adulthood.
And whilst reports about how ‘the Bank of Mum and Dad’ is propping up the housing market have been rife, there is new research which reveals that parents are not just supporting their children with getting onto the housing ladder, but are now contributing to the Private Rented Sector (PRS) in a big way as millennials fall back on renting as a long term alternative to buying.
Financial Services Company Legal & General have been tracking the role that parents play financially for years, and their new report carried out with the Centre for Economics & Business Research (CEBR) reveals the extent to which mum and dad are contributing to the sector. The study shows that 9% of renters get help from their parents in paying their monthly costs, which equates to £2.3bn of rental payments this year on nearly 460,000 properties. As well as contributing to rental payments, one in 10 have also had financial support from parents in paying for security deposits, letting agency fees and moving costs.
The research backs up concerns of a ‘broken’ housing market in the UK, in which young people are finding it harder than ever to get onto the housing ladder themselves, or, as it now seems, even to pay monthly rent. The issues stem from a lack of affordable housing, as well as stagnant wages and crippling student debt which is leaving many millennials with nowhere to turn but to their parents.
A previous study by Legal & General/CEBR highlighted that parents will contribute to £6.5bn of lending this year to assist their offspring in first-time buying, which puts the Bank of Mum and Dad as the ninth biggest mortgage lender in the UK, equal to the Yorkshire Building Society.
Dan Batterton, fund manager for Build to Rent at LGIM Real Assets commented that whilst the huge pay-outs are a testament to the generosity of many British parents it is also a symptom of a broken housing market.
He goes on to say: ‘The UK is experiencing a supply-side crisis in the rental sector. We need more professional, affordable tenures and more choice for renters. We need to build more homes for the young, old and families alike, more quickly and cost effectively. Renters are currently facing not only expensive rental payments but moving costs, agent fees and deposits which are reducing flexibility, something that should be a benefit of renting’.
With the PRS only set to grow as huge numbers favour renting long term it is important for the industry to look at ways to improve the services for serial renters, making it accessible to all who can no longer afford the option to buy.