The so-called bank of mum and dad will shell out £2.3 billion on funding their children’s rent payments this year, according to a new report from Legal & General (L&G) and the Centre for Economics & Business Research (Cebr).
The research found that the bank of mum and dad will fund £2.3 billion in rent payments in 2017, shelling out an average of £415 every time a rental payment is made. Parents now help 9% of tenants across the UK with their financial commitments to their landlords, on almost 460,000 rental properties.
Previous research from L&G and Cebr showing that the bank of mum and dad will support £6.5 billion of lending to first time buyers to help them get onto the property ladder this year means that parents will fund some £8.8 billion in 2017 to help their children to either pay the rent or buy a home.
Dan Batterton, the Fund Manager of Build to Rent at LGIM Real Assets, says: “L&G has been tracking the role of the bank of mum and dad for some years now, but this is the first time we’ve looked at its role in the rental market, and the results are concerning. It is a real challenge for young people who are reliant on parental handouts just to make the rent. The intergenerational inequality that creates the demand for bank of mum and dad funding continues to widen, and now it’s affecting renters too.
“The lack of affordable housing, low wage growth relative to inflation and burdens of student debt mean that many kids can’t even rent somewhere without significant contributions from their family. Parents want to help their kids get on in life, and the bank of mum and dad is a testament to their generosity, but it is also a symptom of our broken housing market.”
He explains: “The UK is experiencing a supply-side crisis in the rental sector. We need more professional, affordable tenures and more choice for renters. We need to build more homes for the young, old and families alike – more quickly and cost effectively. Renters are currently facing not only expensive rental payments, but moving costs, agent fees and deposits, which are reducing flexibility – something that should be a benefit of renting.”
Alongside rent payments, 10% of tenants have had bank of mum and dad help with their security deposits. Meanwhile, 6% had financial assistance from their parents for moving expenses and 5% had help with letting agent fees.
With 64% of renters having moved home at least once in the past five years and homeownership levels under pressure, L&G expects the bank of mum and dad to play an increasingly important role in the private rental sector.
Unsurprisingly, parental support in the private rental sector is highest in London and the East of England, where £626m and £604 was lent in these areas respectively. The bank of mum and dad also funded £175m in rental payments in the North West and £369m in Yorkshire and the Humber.
Batterton adds: “The Build to Rent sector is only going to become more important in the UK’s housing mix. We need to be able to offer young people a good selection of affordable options for rental properties – either for the long-term or as a step to buying their own home.”
With so many tenants relying on financial help from their parents to pay the rent, it’s more important than ever for landlords to protect their income against potential rent arrears.
Our comprehensive Rent Guarantee Insurance ensures you still get paid if your tenant can’t. Get an instant online quote and cover here: https://www.justlandlords.co.uk/rentguaranteeinsurance