And according to forecasts by Frank Knight, the total capital committed to professionally-managed private rented sector accommodation will also rise significantly to £75 billion by 2025.
This exponential growth is also bringing a significant shift in tenant demographics, with increasing numbers of 21-35 year old professionals choosing to rent. This age group is also expected to show the largest growth in households in the private rented sector over the coming years, as millennials – aka ‘generation rent’ - continue to face difficulty in obtaining a mortgage to buy their first home.
Many assume that the majority of millennials are ‘biding their time’ until they can save up a deposit. However, further research shows that tenants actually prefer the benefits of renting and just 42% are interested in buying in the near future. The findings, recently produced lender Landbay, examined the mindset of 2,000 private renters across Britain.
The findings show that ‘flexibility’ is the key reason why tenants didn’t want to step onto the property ladder. Many want the freedom to move as their employment changes, especially the growing number of tenants in the booming ‘gig economy’, which has doubled in size over the past three years, now accounting for 4.7 million workers.
Tahir Farooqui, Managing Director of Canopy, suggest that agents and landlords need to be looking at tenants through a new lens - as ‘customers’ rather than ‘tenants’
He comments: “The lettings industry needs to be providing a better service to build trust amongst tenants and establish a happy and stable relationship.
“Let’s take referencing for example. Currently there are 15 million renters in the UK market who move every 12-18 months and each time, they need to secure a new reference. Historically, this comes from a starting place of ‘I don’t trust you’. The current referencing system is extremely invasive, stressful and time-consuming for tenants.
“Any agent or landlord that has had to deal with millennials will know that they have little patience and rely heavily on technology to get things done. According to 'The Instant Gratification Nation' report, by Fetch in collaboration with YouGov, more than half (52%) say they are more impatient today than five years ago.
“In fact, most (81%) millennials say that improving the speed of undertaking daily tasks was the reason they investigated new technology. This impatient generation has placed huge trust in brands like Uber, eBay and Amazon which offer ‘one click’ services and they have come to expect ‘instant’ services, via their smartphones.
“New technology like Open Banking - the regulation that has released the financial data of consumers from the banks’ ownership and into the hands of consumers - can automatically verify income and past rental payments and pass this on to agents and landlords. Innovative technologies such as rent passports, which access Open Banking data, can provide proof of an individual’s rental and credit history and their ability to pay rent promptly, allowing agents to know immediately if a tenant is suitable for a property.
“Rent passports give tenants control in the application process, offering them a portable, digital rental identity which helps them to improve their credit history. They also can reduce the back-office costs historically associated with the screening of prospective tenants and reduce the risk of rental arrears.
“Tenant referencing costs can be eradicated with the latest, sophisticated fintech products, which can also bring huge improvements to the rental application and management process, making it a quicker and smoother experience for tenants. Agents need to work with ‘best-in-class’ tech partners to build trust, not only for renters, but also for landlords. Eliminating tenant referencing costs is a first step towards that goal.”
