The Government could be facing a new problem in the future, as ageing millennial renters become a major challenge. According to a new report issued by the Resolution Foundation, half of millennials will still be renting in their forties. Another third could even be renting by the time they claim their pensions.
Pensions Could Be Used to Fund Accommodation Costs
During retirement, the hope is that people will be living in un-mortgaged homes. Instead, renters could be relying on their pensions to fund their ongoing costs. This could become a major burden for the government. The amount spent on pensioner housing benefit is expected to reach as much as £16bn 2060.
Immediate Action is Required
The report illustrates that policymakers must deal with the housing crisis now. If not, they face tackling an even more costly issue in the future. With an ageing population, along with a higher proportion of older people in insecure and expensive accommodation, the Government faces a problem that will only get worse if action isn’t taken now.
Current Schemes Aren’t Enough
Current efforts like Help to Buy schemes aren’t doing enough to tackle the housing crisis. Lowering the deposits that are required by younger buyers has mainly boosted demand, rather than supplying the market. The report has suggested that policies need to target the 32% of homeowners who are “over-housed”. This is due to under-occupation of their home or because they own multiple properties. According to the report, this could be done by abolishing stamp duty.
Interest-Only Mortgages are Also a Risk
The rating agency Moody’s has warned that older home owners on interest-only mortgages will not be able to pursue equity release products. This applies to around 76% of UK mortgage borrowers on interest-only deals who will be unable to use equity releases or switch repayment loans to refinance.
Cuts to incentives for Buy-to-Let landlords would also cause problems. The withdrawal of mortgage interest tax relief for private landlords over the next three years will lower rental yields and affect landlords’ ability to re-finance their loans. With a weak house price being forecast, a portion of Buy-to-Let landlords are expected to exit the
