The UK Treasury is bracing for a significant increase in housing benefit payments to pensioners, with projections indicating that the annual cost could skyrocket to £15.4 billion by 2035.
This staggering figure, revealed by the Centre for Economics and Business Research (CEBR), is more than double the current £6.7 billion spent each year on housing benefits for older renters.
The alarming rise in costs is attributed to a combination of factors, including falling home ownership rates and an ageing population. As property prices continue to soar, many individuals across all age groups are finding it increasingly difficult to own their own homes.
The English Housing Survey highlights that the proportion of private renters aged 65 to 74 has risen from 4.2% to 7.4% since the financial crisis, while those in their late 50s and early 60s have seen an increase from 7% to 10.9%. Samuel Miley, an economist at CEBR, warns that the UK is facing a perfect storm of challenges, with an ageing population and a housing market that is not functioning optimally.
Limited housing supply and growing demand are creating difficult conditions for all age groups, particularly older cohorts. The situation is expected to worsen as millennials and Gen Zs reach retirement age.
Unless there is a significant structural change, such as a sharp fall in house prices or a substantial rise in earnings, these generations are likely to be disproportionately priced out of the housing market. The Institute for Fiscal Studies reports that while three in five people aged 25 to 34 were homeowners at the turn of the millennium, this figure has since fallen to only two in five.
Charities and experts have expressed concerns about the suitability of the private rental sector for the elderly, particularly those with health conditions. The unpredictability of renting can have a detrimental impact on their well-being.
Moreover, private renters face a significant financial burden, with Standard Life estimating that they need to save £391,000 more throughout their lifetime to fund their retirement compared to homeowners. As the UK grapples with the challenges posed by an ageing population and a dysfunctional housing market, policymakers must address these issues to prevent a looming crisis. Failure to act could result in a substantial financial burden on the Treasury and leave countless pensioners struggling to secure suitable housing in their retirement years.
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