Opinion

Poor Lifetime Tenants

Written by Sarah Walker

While renting in your 20s and 30s might seem fine, have you thought ahead? If you never manage to buy, your future might be far less rosy than you realise.

When the issue of affordability comes up, there’s always a big faction saying how awful it is that people in their 20s and 30s can’t get on the property ladder, but another group saying there’s nothing wrong with renting. That we should view it more like they do in Europe, where it’s quite the norm. That there are financial benefits, because you don’t have to pay for any property maintenance and if you hit hard times, you can leave at a month’s notice and move somewhere cheaper – you’re not shackled by a mortgage or risking falling into negative equity if the market drops.

Some good points. And if you’re in your 20s or 30s and heading up the career and wage ladder, possibly with a partner or spouse, saving and aiming to buy before you hit 40, smashing.

But what if you’re forty-plus and, like around a third of families in the UK (reportedly), only have a month’s rent in reserve? If you can’t afford to save anything, you’re not going to be able to build up any deposit funds and may not ever be in a position to buy.

So, while the vast majority of those who have managed to buy property make monthly payments to reduce their mortgage debt and arrive in their retirement with (a) no more monthly accommodation costs (b) a home that is entirely their own and (c) a big chunk of equity that they can release if necessary, lifetime tenants simply have a steadily-increasing rent payment each month.

Yes, homeowners have to invest in repairs and improvements over time, but if there’s a particularly big cost that they can’t cover, they can probably either remortgage or take another form of loan to cover that, secured against the equity in their property. And those improvements may well bump up the property’s value, so it could be an investment rather than a cost.

So when a homeowner hits retirement age, chances are they can go ahead and retire. Even if they only have a small pension, they can cut back on expenditure to meet their new level of income because the thing that is most people’s biggest monthly cost – their mortgage or rent payment – is no longer there.

In contrast, when someone who’s lived in the private rented sector all their life hits retirement age, unless they’ve been in a position to make significant private and/or workplace pension contributions – in which case, they could probably have been saving for a deposit! – they’re going to have to keep on working. If they want to stay in the PRS, that is. Otherwise, they’re going to be knocking at the door of the social sector and the queue at that door is already pretty long.

Research from Knight Frank published in August 2017, indicates that by 2021 nearly a quarter of all households in England will be living in the PRS….what happens when the heads of those households want to retire?

Lifetime tenants seem to have three choices for a place to call home in ‘retirement’: move in with family, fling themselves at the mercy of their local authority (better hope the government starts hitting its affordable housebuilding targets) or forget retirement.

I know which one I’ll be doing.

About the author

Sarah Walker

Sarah Walker is a freelance writer and editor with extensive knowledge of the property investment industry.

A former estate agent and television presenter, Sarah has spent over a decade writing for industry publications and leading UK property companies, producing a wide range of marketing and PR content, including consumer guides, newsletters, website copy, articles and reports.

She has ghostwritten a number of property investment books, edited several others on property, business and branding, and continues to work with entrepreneurs to produce literature that supports their business enterprises. Sarah has been both a landlord and a tenant herself and has invested in the UK and overseas.

Away from her laptop, she’s a keen photographer and loves exploring the Scottish Highlands. Skiing is her sporting passion and she’s an enthusiastic member of her local amateur dramatic society.

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