Tough time for young tenants, says think tank

The Institute for Fiscal Studies says that while mortgage-paying owner occupiers and landlords have benefitted hugely from low interest rates, renters - especially young ones - have had no such respite in the lettings market.

New research from the IFS shows that between 2007/8 and 2012/3 owner occupiers with a mortgage saw a 38 per cent real-terms fall in their real housing costs, due to large falls in interest rates. Their real incomes fell over this period too, but as a proportion of income their housing costs still fell from 16 per cent to 10 per cent says the research, which described the financial climate as very forgiving. for this group.

However, costs for renters have not been offering anything like this scale of relief. Housing costs as a proportion of income rose for renters between 2007/8 and 2012/3 from 25 per cent to 27 per cent. Even here, though, the story is perhaps a little more benign than popularly perceived. Average housing costs for private sector tenants have actually risen little faster than other (non-housing) prices since 2007/8 claims the IFS.

The institute also says changes in what it calls the regular costs of housing consumption have been very favourable for existing owners, while high house prices and tighter credit conditions make it harder to move from the rental into the owning category.

There has been a striking decline in homeownership that largely reflects differences across successive generations. The homeownership rate at age 35 of those born in the mid-1970s was 10 percentage points lower than it was for those born in the mid-1960s at the same age; the age-25 homeownership rate has halved in 20 years says the IFS.