Leaving home in the middle of a financial crisis, like most Millennials (those born between 1980-1996) did over a decade ago, made buying a home difficult. Collectively, Millennials are likely to have paid more in rent than any other generation.
At their peak in 2017, Millennials were paying £33.3bn in rent which made up 55% of the total rent bill. But as the oldest Millennials turn 40, their rental bill is now dropping sharply as they become less likely to be a tenant and more likely to own their home. This year, Millennials are likely to pay £24.0bn in rent, 28% less than their 2017 peak. They currently account for 42% of all rent paid in Great Britain.
With fewer Millennials renting, the overall amount of rent being paid is falling too. The total amount of rent paid by tenants across Great Britain has fallen 8% from a peak of £62.4bn in 2018 down to £57.3bn in 2021. This fall takes the amount of rent paid by tenants back below 2015 levels.
In previous years when the number of renters was growing, this figure would have been pushed back up by the next generation flying the nest. But Generation Z’s (those born between 1997-2012) bill is growing more slowly than Millennials’ ever did when they left home.
An average of 16 years younger than their Millennial counterparts, Generation Z’s total rent bill doubled from £1.8bn to £3.6bn between 2020 and 2021. This figure is likely to double again next year. However, the total amount of rent they pay is increasing at a slower rate than the Millennial rent bill ever did. Covid-19 is likely to have worsened this, with more would-be first-time renters staying at home with parents during the pandemic.
Among older generations, however, Generation X’s (those born between 1965-1980) rental bill has remained significantly higher than Baby Boomers. This is partly a product of them renting more expensive homes than any other generation. But with the average member of Generation X turning 50 this year, those who haven’t already bought are becoming increasingly less likely to do so.
Looking ahead, we expect Millennial’s collective rental bill to continue dropping sharply for the next couple of years before flattening out as those who want, or are able to buy, have already done so. If current trends continue, Millennials could be paying the same amount of rent as Generation Z within five years. And the rental sector is likely to continue shrinking as a result.
Rental Growth
Rents in Great Britain continue to pick up pace. The average rent of a new let in Great Britain rose 7.4% or £75 in August compared to the same month in 2020 to stand at £1,085 pcm. This time last year rents fell 1.0% annually. Southern regions outside of London continued to see the strongest growth. Rents in the South West rose 13.9%, followed by the South East (12.8%) and the East of England (10.9%) . London saw the weakest growth, with rents up 1.4% annually. While rental growth in Outer London softened a little to 3.9% in August, Inner London rents continued to recover. The average rent in Inner London remains 8.8% cheaper than in August 2020, however rents rose 5.8% or £116 between July and August this year.
