Generation rent may be a phrase more associated with younger people, but new data shows a surge of older people now renting their home.
The number of over 55s renting has more than doubled over the past decade as pension incomes wane and later life divorce becomes more common.
There has been a 118 per cent surge in 55 to 64 year-olds renting since the turn of the last decade, while those over 65 in the same boat is also up 93 per cent, according to research from buy-to-let mortgage lender Paragon.
This rate of growth is nearly double the next fastest growing age group – 35 to 44-year-olds.
Pensioner renters: The South East, London, North West and South West account for the highest number of households with renters over 65
Richard Rowntree, Paragon Bank managing director of mortgages, said: ‘There are a number of factors that may have contributed to the increase in over 55s renting over the past 10 years, such as rising divorce among older people, poorer pension returns and factors such as men living longer.
‘With the number of over 55s forecast to rise and new household formation predicted to be driven by older, single person households, the private rented sector will have an increasingly important role to play in providing a home for older tenants.’
Writing in Paragon’s report, The Growth of Later Life Tenants, Rowntree said the care home sector is ‘failing to keep pace with demand for new beds and social and demographic changes are creating increasing numbers of single person households’.
‘The majority of these are in the over 55 category and home ownership is often out of their reach,’ he said.
‘For many, renting privately will be the solution and landlords are already reacting to this trend.’
Rising demand from retired renters
Population forecasts show that by 2043, the proportion of the UK population aged over 55 will increase from 30 per cent to 36 per cent.
That represents six million more over 55s and approximately 26million people in this age bracket.
In the near term, figures from the Office for National Statistics forecast that by 2028 there will be a 34.5 per cent increase in the number of households whose main resident is between 75 and 84 years old and a 24.1 per cent increase in households whose main resident is 85 or older.
Paragon’s research suggests that many of these households will be renters rather than homeowners in the future.
Higher rates of divorce in later life, the cost of downsizing and less generous pensions are all accelerating this move.
ONS data show the number of men divorcing aged 65 and over went up by 23 per cent between 2005 and 2015, with the number of women of the same age divorcing increased by 38 per cent.
Men are also living longer, which Paragon’s report claims as one of the reasons there are so many more older renters.
Since the early 1980s, men have almost always experienced greater improvements in life expectancy at birth than women, with the life expectancy gap narrowing to 3.7 years.
At the same time, pensioner income has stagnated since the turn of the last decade, according to the Department for Work and Pensions figures.
The average income of all pensioners in 2018/19 was £320 per week, compared to £314 in 2009/10.
Inflation averaged 3.1 per cent a year over the same period, meaning something costing £100 in 2009, would cost £135.15 in 2019, putting strain on retirement incomes.
The low interest rate environment of the past decade has also limited income from savings, while the proportion of pensioners receiving an income from investments has declined consistently since the mid-1990s.
An option for asset rich, cash poor homeowners could be to sell and either downsize or rent.
Who are the UK’s retired renters?
• Over-55s are much more likely to live alone, with 48 per cent in this category versus 23 per cent of under-55s
• They also tend to live in the property for a long period
• They are also much more likely to be men, accounting for 62 per cent of tenants
• Half of over-55s have lived in only one or two rented properties; of those who have lived in only one property, 46 per cent of tenants have lived there for 10 years or more. The average length of time tenants have lived in the rented sector is 13 years
• Nearly seven in 10 over-55s said that renting suited their needs or they enjoyed renting, compared with 49 per cent in the under 55 group
• An overwhelming majority said they were pleased they don’t have to worry about repairs
• When asked about the reasons for renting, 39 per cent said they didn’t have a mortgage deposit and 22 per cent said they didn’t want the responsibility of owning a home, compared to 9 per cent of under 55s
• 16 per cent said it enabled them to live in an area they couldn’t afford to buy and 15 per cent said because it gave them the flexibility to move easily
• Tenants in the 55+ category are also much less likely to want to own their home – 45 per cent compared to 81 per cent of under-55s
• Of those who do, 62 per cent don’t think they will be able to afford their own home and one in five believes they will buy within the next two years
Social care crisis
Another factor contributing to rising demand for rented accommodation from older households is the cost of care and availability of beds in care homes.
At current development rates, it is forecast the number of beds in the care home sector will fall short of what’s required to satisfy demand.
The UK care home market is growing in absolute terms, but declining in relative numbers.
Across the UK, the number of beds only increased by 0.9 per cent between 2014 and 2019, while the population aged 85+ grew by 9.1 per cent.
According to analysis by Knight Frank, the number of beds per 100 people over the age of 85 has fallen from 33.7 to 28.7 over the past decade.
If the same rate of growth in beds is maintained over the next 10 years, bed provision will fall much further.
In addition to new developments not keeping pace with population forecasts, the sector also faces an issue with ageing stock.
‘There are 730,000 retirement housing units across the UK, according to the Elderly Accommodation Counsel,’ says the Paragon report.
‘More than half these homes, 52 per cent, were built or last renovated over 30 years ago.’
Should landlords invest for older tenants?
Paragon research shows that a fifth of landlords expect growth in the market for retired renters over the next year.
But catering for later life renters presents opportunities and challenges for landlords.
This cohort of tenants typically stay in a property for longer, maintain the home well and benefit from stable income, usually in the form of a pension.
However, homes need to cater for the physical restrictions some of these tenants may face, while this tenant group is much more likely to have a disability or long-term illness.
Rowntree said: ‘Landlords are already reacting to the changing demographics and with older tenants becoming more commonplace, will have to increasingly do so.
‘Landlords will need to consider longer tenancy agreements, the location of their property and any adjustments the property may need for later life tenants.’
The 55-64 and 65 and over cohorts of tenants are the fastest growing segments of the private rented sector
At 576,000 households, those aged over 55 represent 16.2 per cent of privately rented households.
This has grown steadily since the turn of the decade, when 11.3 per cent of the sector was made up of over-55s.
Paragon’s research showed landlords appear to be responding to this change in demand, with 21 per cent of landlords expecting to let more to older singles in the future and 20 per cent expecting to let to retirees.
This was second only to letting to professionals, executives or companies.