They’re the young adults who have drawn the short straw when it comes to housing, been priced out of home ownership as a result of rising house prices and doomed to a life in expensive rented accommodation. Generation Rent is an ever-growing group in the current economy, with demand for rental accommodation predicted to rise by over 1 million in the next five years* and only 1 in 4 to be homeowners by 2025**. So, what is being done to help the 20-39 year olds and others get on the property ladder? The latest government White Paper ‘Fixing our broken housing market’ has outlined plans to build more affordable homes across England and make renting fairer.
Here are some of the points the government has pledged in the long-awaited White Paper, whilst also confirming previous plans and initiatives:
- Build 225,000 affordable homes as part of the previously announced £7.1 billion Affordable Homes Programme. This includes shared ownership, rent-to-buy and affordable rented homes
- Release surplus public land with the capacity for 160,000 homes – Currently only 11% of land in England has been built on***
- Speed up house building by shortening the timescales that developers have to start building, from 3 years to 2 years and encouraging smaller developers
- Encourage efficient use of existing homes that have been empty for a long period by imposing higher council tax
- Build the right homes in the right places by having councils make five-year housing plans to meet local demand and audits to ensure they hit targets
- Have high rise flats in places where land is short and more homes in areas around transport links
First time buyers
The Starter Home scheme, launched in 2015, which aims to help first-time buyers under the age of 40 purchase new homes priced up to £250,000 or £450,000 in London will be sold at a 20% discount. The White Paper goes on to establish that buyers wanting in on the scheme will have to have a household income of less than £80,000, or £90,000 for London. There will be a 15 year repayment period for a starter home and those eligible will be required to have a mortgage to prevent cash buyers.
The Lifetime ISA will be launched in April this year and will give young adults 25% bonus on £4,000 savings a year, which can be put towards purchasing their first home or withdrawn when they reach 60.
The plans for an increase in affordable housing are said to eventually bring down the cost of renting. The government has said they will look to bring forward the already announced ban on letting agent fees, which should improve competition in the market, as well as give renters more control and clarity over what they pay. They will also begin to implement the banning orders to remove the worst landlords or agents from operating. For families, rental homes with longer tenancies have been proposed to make the private rented sector more family friendly.
So how can generation rent improve their financial health? We produced a guide in collaboration with the University of Edinburgh, the Chartered Institute of Housing and Generation Rent, on how to build a better long-term financial future, whatever your situation, because waiting to get on the property ladder is too late to start thinking about managing your finances. You can read the guide here.