Britain | Residential property

Housing the “rentysomethings”

Professional young renters may help transform the property scene

|Epsom

TWO-THIRDS of families in England own the homes they live in, more than in France or Germany, say. But the pattern is changing fast. Homeownership rates began falling a decade ago, as prices went up more rapidly than earnings, foreigners flooded in and young people found it harder to get stable work. Then came the financial crisis, and banks stopped dishing out mortgages to passers-by. Today 83% of parents with children aged 20 to 45 own their own home but only 44% of their offspring do, a survey by the National Centre for Social Research found.

Britons who see homeownership as the foundation not only of a prosperous old age but even of civic virtue shudder at the prospect. Is it so bad? Owning bricks and mortar ties people down when the labour market increasingly demands mobility. Young folk are slower to form families anyway. Homes have been a good investment, thanks to dizzying price rises and relief from capital-gains tax. But price rises may be more muted in future, and some preternaturally brave politician could just possibly remove the tax break.

The real downside to renting is the limited quantity available, in some places the quality, the price and the chaotic way most of it is managed. Almost all privately rented properties are in portfolios of ten or fewer; amateur landlords often ramble up to fix the heating days after a fault is reported; and the standard lease is for just six months. There is much fevered thinking about how to improve things—not least in the bosom of the government, which has tinkered with the tax code and commissioned an inquiry due to report soon.

A group that Harry Downes of Fizzy Living, a residential-property firm, calls “the rentysomethings” may force change. Aged between 25 and 40, and earning £25,000 ($39,000) to 30,000 a year, they are too rich for subsidised housing but too poor to come up with the deposit (now usually 20%) on a house. They are uninspired by the rental homes on offer, sick of being turfed out at a moment's notice and likely to be renting for quite a while. What they want, Mr Downes thinks, is a place—perhaps to share—that is trendy, inexpensive and easy to run, with someone on hand to fix leaky taps, a fast train or Tube to work, a short, safe walk to the station, and a lively young community.

Geeta Nanda, chief executive of the Thames Valley Housing Association, agrees, and tucked Fizzy Living under her wing. The association put up £30m to buy two buildings under construction that seemed to fit the bill. One motive, she says, is the need for profits to counteract the cuts in government grants and benefits that threaten associations' services to the poor. Thames Valley will manage the flats, while Fizzy Living brands and markets them.

In July tenants will start moving into a bright, 75-unit building in Canning Town, east London, and later into 63 new flats in Epsom, Surrey. The flats are small but neatly designed. Rents are pitched at less than 40% of typical after-tax earnings. Tenants can rent furniture and select an internet package from three on offer. It seems a nicer version of the purpose-built student housing that many will have come from.

For this approach to be repeated on any scale, outside investors—institutions or big property companies—must be brought in. They have been reluctant to bankroll most rental residential property in the past: properties were too scattered, tenants too flaky, returns too slim. But investors made packets on the student housing that Fizzy Living calls to mind. As other asset classes head south, they may remember.

This article appeared in the Britain section of the print edition under the headline "Housing the “rentysomethings”"

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