Housing Survey: energy-eating monster homes, rental trap nightmares and the power of the Bank of Mum and Dad

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, comments on English Housing Survey, showing energy-eating monster homes, rental trap nightmares and power of Bank of Mum and Dad.

Several reports and tables from the English Housing Survey 2020/21 were published today.

We’ve rounded up some of the highlights:
  • The Bank of Mum and Dad still a major lender.
  • Caught in the rental trap: millions never expect to buy.
  • The energy-eating monster homes – and the older people trapped in them.
The Bank of Mum and Dad still a major lender:
Sarah Coles says:

“The Bank of Mum and Dad was still a major lender, helping 7% of first-time buyers onto the property ladder in 2020/21. And they weren’t just putting their hands in their pockets, because there’s every sign they were  welcoming their boomerang kids back into the home to help them save for their first property too.

“Some 41% of first-time buyers were forming a brand-new household, which is the highest this figure had been for over 20 years.

“For those who can afford to help, it’s brilliant to be able to give your offspring a good start in life. Given that the average age of a first-time buyer is 30, even with this help, it means without parents stepping in, we would have an even more rapidly aging rental population. It’s also often a far more positive stage to help than the 4% who have had to wait for an inheritance to get them onto the property ladder.

“There’s a reason why financial planners say it’s far better to give with a warm hand than a cold one.

“However, parents need to be aware of the costs involved. If they are dipping into the equity in their home, it may well mean paying their own mortgage for longer.

“If they’re spending their savings, they need to be sure they still have enough for emergencies, and if they’re spending a lump sum from their pension, they need to be aware of the impact on their retirement income.

“Because while we always want to help our offspring, it’s not going to help anyone if we damage our own financial resilience irreparably in the process.”

Caught in the rental trap: millions never expect to buy:
  • One in five homes were rented privately, and only 61% of people in these homes expected to buy in future. Of those who didn’t, 52% said they couldn’t afford to.
  • Only 38% of the lowest fifth of earners expected to buy at some point.
  • Private renters spent 31% of their income (including housing support) on rent, while those with mortgages spent 18%.
  • Private renters spent £198 on weekly housing costs (£340 in London) – compared to £174 for those with mortgages.
  • 25% found it hard to pay rent – rising to 36% among the bottom fifth of earners.
  • 55% of private renters had savings – compared to 81% of owner/occupiers.
  • 71% of private renters with savings said they would eventually buy a home, compared to 50% of those with no savings.
  • English Housing Survey data on social and private renters – GOV.UK (www.gov.uk)
  • English Housing Survey: Private rented sector, 2020-21 (publishing.service.gov.uk)
Sarah Coles says:

“Millions of people are caught in the rental trap – paying a small fortune to keep a roof over their head, and struggling to save, while prices soar even further out of reach. Almost two in five private renters never expect to be able to afford a home of their own, which raises enormous challenges throughout their lives.

“One in five people rented privately, and 17% lived in socially rented housing. Among those who rented privately, the huge burden of rent meant that housing costs swallowed almost a third of their income, compared to property owners for whom it made up less than a fifth. It meant that one in four of them were struggling to pay the rent, let alone save anything for the future. This was back in 2020/21, well before runaway rents and massive inflation made everything so much harder.

“Even back then, only just over half of renters were able to save anything, which reflects the findings of the HL Savings and Resilience Barometer, which found renters were less likely to have money left over at the end of the month, and less likely to have savings to fall back on. What’s even more alarming is that the Barometer forecasts that over the next 12 months, things are going to get even tougher for renters.

“And it’s not just the cost, renters are also at the mercy of their landlord, and when they chose to raise the rent or sell the property altogether. Three quarters of private renters moved by choice in 2020/21, but 6% were asked to leave – and of those, 63% said it was because the landlord wanted to sell.

“This is hard enough at any age, but we’re renting later in life, which makes the upheaval even more difficult to live with. In 2021/21, although 21% of private renters were aged 35-44, 17% were aged 45-54, and 9% were aged 65 and over. What’s more, by this stage we may have families to uproot. Just under one in five private renters were couples with children and just over one in ten were single parents.

“Aging renters were increasingly unlikely to ever expect to buy, which raises problems for retirement. While most owner/occupiers expect to have paid off the mortgage by then, rent continues for life. It means that renters will need to work out how they’ll afford the extra costs, and put money aside to cover it. Given that so many of them are struggling to pay the rent and build savings, this may well be a step too far.”

The energy-eating monster homes – and the older people trapped in them:
  • In 2020, 46% of properties were in the highest energy rating bands of A to C. in 2010 only 14% of them were.
  • The older a house was, the higher the average energy bill. Pre 1919 averaged £1,125, while those built post 1990 averaged £627.
  • The newer a property was, the higher the energy efficiency rating, the cheaper it was to heat, and the less it cost to improve.
  • Households with higher incomes were more likely to live in the most energy efficient homes. 4% of the highest earners lived in a home rated A or B, compared to 2% of the two fifths of people on the lowest incomes.
  • The average energy bill was £844. For those with gas central heating it was £811, for those with oil heating it was £1,590, and for those with room heaters rather than central heating it was £1,162.
  • 88% of homes had gas heating system. Only 3% were oil fired, but  older people were more likely to have oil fired heating than any other age groups (7% of couples aged 60 and over).
  • English Housing Survey data on energy performance – GOV.UK (www.gov.uk)
  • English Housing Survey: Energy Report, 2020-21 (publishing.service.gov.uk)
Sarah Coles says:

“Older people and those on lower incomes are trapped in energy-eating monster homes. While on average houses have been getting much more energy efficient, there’s a vast gulf between the best and the worst performing. Older people and those on lower incomes are most likely to live in the draughtiest houses and have been hit with the most horrendous energy bills. They’re also more likely to face a massive cost if they want to improve things.

“Older houses, which are often home to older people, are the least efficient, cost the most to heat, and are more likely to be too expensive to improve. Those with no central heating (who use heaters in individual rooms) or with oil-fired heating, face enormous heating bills. Older people are far more likely to need to use oil.

“Since this survey was carried out in 2020/21, things will have got far worse. We had a sizeable increase to the energy price cap at the end of 2021, along with a massive hike in April 2022. Meanwhile, the price of heating oil has risen 123% in a year. It means the gulf  between the best and worst performing will have widened.

“To make matters worse, the older the house, the more it’s likely to cost to improve. A fifth of houses built before 1919 would cost £15,000 or more to make energy efficient  which is way beyond the means of an awful lot of people on low or fixed incomes.”

More figures on the cost of improvements:
  • Houses built after 1990 (17%), were more likely to cost less than £1,000 to reach an EER band of C compared with older dwellings (2% to 9%).
  • Houses built before 1919 (20%) were more likely to require £15,000 or more to reach an EER band of C than all other aged dwellings (2% to 6%).
  • The average cost to improve D to G rated dwellings to a EER band C was £7,737.
  • It would cost less than £10,000 to improve around three quarters (72%) of dwellings to a band C and more than £15,000 to improve around one in ten (9%) dwellings to a band C.
  • For those that were able to be improved to at least a band C, the average annual energy cost savings were £282.

 

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay