Millennials set to rent for longer

The total amount of rent paid by tenants in Great Britain this year will hit £85.6bn, over twice what it was in 2010 and £8bn more than in 2022, according to Hamptons.

The latest data from the agency shows that rents on new tenancies rose 10.2% year-on-year across Great Britain last month, marking the strongest growth recorded in any November since our records began in 2014

Gen Z’s (born between 1995-2012) continue to close the gap on millennials (born between 1980-1994), paying £30.5bn in rent this year.  Millennials also spent a record £36.8bn on rent in 2023 as higher mortgage rates kept them renting for longer.

Meanwhile, London tenants spent a record £32.1bn on rent this year, more than the total amount paid by renters in the North of England, Midlands, Wales & Scotland combined (£29.4bn).

Chart 1 – Total rent paid by tenants across Great Britain each year

Source: DLUHC & Hamptons                             

Tenants across Great Britain are set to pay a record £85.6bn in rent in 2023 (chart 1) (*methodology outlined in note to editors).  Double-digit rental growth over the last year means the total rent bill has increased by £8.0bn over the last year from £77.6bn in 2022, marking the biggest annual jump on record.  The total rent bill is now more than double what it was in 2010 (£40.3bn), partly because the number of households renting has increased by 25% or 1.1m over that period and partly because rents have risen too.

The average rent on a newly let home in Great Britain rose to £1,348 pcm in November, up 10.2% or £125 pcm on the same month last year.  This marked the seventh double-digit increase over the last 12 months and the strongest annual rate of growth recorded in any November since our records began in 2014.

Chart – Total rent paid by different generations across Great Britain each year

Source: DLUHC & Hamptons

Millennials (born 1980-1994) continue to dominate the rental market.  They spent a record £36.9bn on rent in 2023, reversing the falls recorded between 2016 and 2020 when more millennials became homeowners.

In 2016, Millennials made up a record 58% of all rented households.  That figure then fell to a low of 42% in 2021, before rising again to 44% in 2023.

Strong rental growth since Covid began, combined with higher mortgage rates has kept the tail end of millennials renting for longer and pushed up their rent bill.  If rates had stayed low, we would have expected their total rent bill to continue falling from 2020 as more became homeowners.  However, with the average millennial now aged around 35, we’re approaching the point where those who haven’t bought will likely be renting into retirement.

Meanwhile as Generation Z (born 1995-2012) continue to leave home, more are becoming renters.  They spent £30.5bn on rent in 2023, £6.3bn more than in 2022 which marked the biggest annual increase of any generation.  They made up 36% of all renters this year, up from 1% a decade ago.

Generation X (born 1965-1979), Baby Boomers (born 1946-1964) and the Silent Generation (born 1925-1945) all saw their rent bill fall, albeit marginally, in 2023 (chart 2).  This was driven by small numbers becoming homeowners later in life, rather than them paying less rent each month.

Table – Total rent paid by tenants in each region

Region Total rent paid in 2023 (£bn) YoY Change

(£bn)

London  £                         32.1  £                           3.4
 South East  £                         12.1  £                           1.0
 East of England  £                           7.4  £                           0.8
 South West  £                           6.7  £                           0.3
 North West  £                           6.3  £                           0.6
 West Midlands  £                           5.4  £                           0.6
 Yorks & The Humber  £                           5.1  £                           0.4
 Scotland  £                           4.4  £                           0.4
 East Midlands  £                           4.1  £                           0.4
 North East  £                           2.1  £                           0.1
 Wales  £                           1.9  £                           0.1
 GREAT BRITAIN  £                         85.6  £                           8.0

Source: ONS & Hamptons

London has seen the strongest rental growth over the last year.  The average rent in the capital rose to £2,425 pcm, 11.8% or £255pcm more than in November 2022.

Consequently, tenants in the capital paid a record £32.1bn in rent this year, up from £28.7bn in 2022 and £17.5bn a decade ago.  This means that the total rent bill in London is bigger than the bill in the North of England, Midlands, Wales and Scotland combined (£29.4bn).

Rental growth in London continues to be driven by Inner London.  Here, rents on new tenancies grew 13.2% last month.  Beyond the capital, the Midlands where rents grew 10.9% year-on-year, overtook Scotland as the second fastest region for rental growth last month.

However, rental growth across Great Britain continued to cool a little from its 12.0% peak in August.  Seven of the 11 regions in Great Britain saw the pace of rental growth slow last month.  Scotland and the South East saw the biggest monthly slowdown.  Even so, rental growth has not decelerated as much as we expected given landlords’ rising costs and a lack of homes available to rent

Table – Rental growth on newly let properties in November 2023

Average monthly rent YoY % YoY £
Greater London £2,415 11.8% £255
   Inner London £3,174 13.2% £369
   Outer London £2,271 11.5% £234
East of England £1,263 11.7% £110
South East £1,409 9.0% £117
South West £1,162 5.1% £57
Midlands £945 10.9% £93
North £891 9.3% £76
Wales £807 7.9% £59
Scotland £923 10.4% £87
Great Britain £1,348 10.2% £125
Great Britain (Exc. London) £1,073 9.3% £91

Source: Hamptons

Aneisha Beveridge, head of research at Hamptons, said: “Tenants across Great Britain paid a record £85.6bn in rent in 2023, equivalent to the total value of all homes sold in London last year.  While over the last 12 months the rent bill has increased because of record-breaking rental growth, longer-term it’s mostly risen as a result of more households renting.

“Higher interest rates in the medium term are likely to mean more millennials rent for longer.  This is why the millennial rent bill has risen over the last few years, at a time when it might have been expected to fall.  With the rate at which millennials climb onto the housing ladder slowing, they’re starting their own families and renting larger, more expensive homes which is pushing up the amount of rent they pay.

“This also means that while Gen Z are set to start paying more rent than millennials in the next couple of years, that crossover is likely to come later and at a higher point.  And given that it gets progressively harder to get onto the housing ladder later in life, an era of higher rates will likely mean that more millennials will be renting for the rest of their lives.”

 

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