Widening gulf between generation rent and homeowners

New analysis by Lowell shows the widening gulf between generation rent and homeowners.

The new data shows tenants in private rental hotspots, like Bristol West, are struggling with loan defaults and resorting to benefits to say afloat, exposing the full, significant impact of rent rises and high housing costs on personal finances. Conversely, areas of high home ownership have been protected from recent shocks with households seeing their personal finances improve over the same period.

Areas with high housing costs are also seeing significant rises in benefits usage and loan defaults as those mortgage costs are either taken on board or passed on to renters. Private landlords are raising rents, forcing renters to risk borrowing more, applying for benefits, paying back debts late or defaulting and depleting their savings.

In Poplar and Limehouse, where 34% of people are in private rented accommodation, the impact on household budgets has been severe with loan defaults rising by nearly 5% and benefits usage up by 5.3% from Q2 to Q4 2023.

In Ealing Central and Acton, where 33% of people are in private rented accommodation, loan defaults have risen by 4.1% and benefits usage by 6% across the same time period.

The average age in these renting hotspots is four years younger that it is in the 207 primarily rural constituencies that have seen their savings rise and borrowing fall. Cities like Bristol, Cardiff, London, Manchester and Portsmouth have been hit particularly hard.

High house prices are hammering households in a further 168 constituencies as interest rates lead to a spike in mortgage costs. These areas, predominately in the outskirts of London, are struggling with the double whammy of high mortgage costs for homeowners and follow -on rent pressure for tenants.

In Finchley and Golder’s Green, loan defaults have risen by 3.5% and benefits usage has risen by 4% from Q2 to Q4 2023.

Data suggests a growing divide between rural and urban areas as older outright homeowners have been shielded from the economic headwinds of recent years. Rural areas like these have benefited from higher numbers of retirees with their more stable incomes.

In East Devon where 45% of households own their home outright only 3% of adults claim benefits, less than half the national average of 8.5%. Credit usage in the area also fell by 1.7% from Q2 to Q4 2023 bucking the national trend.

Commenting on the data, John Pears, Lowell’s UK CEO, said “We know there is a growing gap between homeowners and renters, but we haven’t seen its direct impact on people’s day-to-day finances. The study exposes the true gap that the housing crisis and inflation has created, significantly driving up costs for renters in the UK.

“People in these areas are struggling with costs, turning to credit and relying on benefits reducing their overall financial resilience. It is not easy. Worst of all, the burden is really falling on younger renters. We need to address this gap and better understand the growing divide in our society.”

Top 10 renting hotspots

Ranking	Constituency	% private renting	Default change	Credit use change	Benefits change	Savings gap to rest of UK	FVI change
1	Bristol West	40%	+2.6%	-0.3%	+2.9%	+0.8	+4.9
2	Cardiff Central	36%	+2.8%	-0.5%	+1.1%	+13.8	+4.4
3	Hampstead and Kilburn	36%	+2.9%	+0.3%	+3.4%	-20.2	+5.5
4	East Ham	35%	+2.9%	+1.9%	+10.3%	+9.8	+7.6
5	Manchester Central	35%	+4.2%	-1.1%	+3.9%	+13.8	+0.9
6	Poplar and Limehouse	34%	+4.8%	+0.5%	+5.3%	-0.2	+3.1
7	Ealing Central and Acton	34%	+4.1%	-0.0%	+6.0%	-15.2	+8.1
8	West Ham	33%	+4.9%	+0.4%	+9.3%	+1.8	+5.1
9	Manchester, Gorton	33%	+3.3%	-0.5%	+7.1%	+13.8	+3.5
10	Portsmouth South	33%	+3.4%	-0.1%	+3.9%	+5.8	+5

Outright home ownership hotspots

Ranking	Constituency	% outright homeowning	Default change	Credit use change	Benefits change	Savings gap to rest of UK	FVI change
1	Christchurch	50%	+1.5%	+0.0%	+0.7%	+0.8	+0.4
2	New Forest West	47%	+1.7%	-0.0%	+1.0%	-3.2	-1.1
3	Clacton	47%	+3.0%	-0.8%	-1.3%	+11.8	-0.7
4	Sefton Central	47%	+2.0%	-1.8%	+0.3%	-3.2	-4.8
5	Na h-Eileanan an Iar	47%	+1.5%	-0.4%	-2.4%	-5.2	-1.9
6	Dwyfor Meirionnydd	46%	+1.7%	-1.2%	-0.1%	-8.2	-0.1
7	Wyre and Preston North	46%	+2.7%	-1.7%	+0.9%	-5.2	-3.1
8	Brecon and Radnorshire	46%	+1.8%	-1.5%	+0.9%	-9.2	-0.6
9	East Devon	45%	+1.9%	-1.7%	+0.5%	-6.2	-7.1
10	Carmarthen East and Dinefwr	45%	+2.0%	-2.7%	+0.2%	-8.2	-6.1