The Bank of Mum and Dad will fund £2.3 billion of rental payments in 2017, paying out on average £415 every time a rental payment is made, according to a new report from Legal & General and Cebr (Centre for Economics & Business Research).
The Bank of Mum and Dad now helps 9% of renters across the UK with their financial commitments to their landlords on nearly 460,000 properties.
Previous Legal & General/Cebr research showing the Bank of Mum and Dad will support £6.5 billion of lending to first time buyers to get on the property ladder this year means the Bank of Mum and Dad will fund some £8.8 billion in 2017 helping children to either rent or buy a home.
Dan Batterton, fund manager, Build to Rent at LGIM Real Assets, said: “Legal & General 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 BoMaD 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.
“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.
“Legal & General is playing its part by building and financing thousands of new homes for rent, professionalising the experience for tenants, so that they can be assured of quality, transparency and surety of tenure. By controlling all aspects of design and service, and taking advantage of economies of scale, we can deliver better value for money and more choice for our occupiers. This includes favourable all-in costs, through significantly reduced energy costs, no letting fees, and a number of free services.”
Other findings from Legal & General’s “Bank of Mum and Dad” research include:
- The Bank of Mum and Dad will fund £2.3bn of rent payments in 2017
- In 2017, 9% of renters will receive BoMaD financial assistance for their rental payments. 10% of renters have had BoMaD help with their security deposit
- Some parents helped with other rental costs – moving expenses (6%) and letting agent fees (5%)
- With 64% of renters having moved at least once in the past five years and home ownership levels under pressure, we can expect BoMaD to play an increasingly important role in the private rented sector
- In 2017, BoMaD has helped pay rent due on nearly 460,000 properties
The Bank of Mum and Dad’s payments to the rental sector are highest in London and the East of England, lending £626m and £604m in these areas respectively.
Batterton added: “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. Institutions like Legal & General can regenerate not just residential housing, but the towns and cities in which the homes are built. Infrastructure, jobs and local economic growth are all key to creating thriving communities where people want to live.”