Ageing millennial renters will present the Government with a major fiscal challenge in future years, a major thinktank has warned.
Half of millennials will still be renting in their forties, and a third could still be renting by the time they claim their pensions, the Resolution Foundation has claimed in a new report on housing.
Renters relying on pensions to fund their ongoing housing costs, rather than living in un-mortgaged homes could prove a major burden for the government, leading the amount spent on pensioner housing benefit to more than double, reaching as much as £16bn by 2060.
Projections, revealing a perfect storm of an ageing population and a higher proportion of older people in insecure and costly rented accommodation illustrated how policymakers must tackle the housing crisis now or face footing a massive future bill, the report said.
A radical rethink of taxes is required, rather than efforts such as Help to Buy which lower the deposits required by younger buyers and boost demand rather than supply in the market.
Instead, policies need to target the 32pc of homeowners who are so-called "over-housed", due to under-occupation of their home or because they own multiple properties. This could be best done by scrapping stamp duty, apart from in cases of foreign or second home buyers, the report suggested.
Cutting this particular housing tax would reduce the “stickiness” of the UK housing market, by increasing transactions and making it easier for over-occupiers to downsize more easily.
The research comes as rating agency Moody’s has also warned that older borrowers on interest-only mortgages will not be able to pursue equity release products, in order to supplement their pensions.
Some 76pc of interest-only UK mortgage borrowers will be unable to use equity releases or switch to repayment loans to refinance, Moody’s claimed, with 45-65 year-olds the hardest-hit cohort.
Cuts to incentives for Buy-to-let landlords would also cause headaches for interest only-mortgage holders in the rented sector. "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," said Gaby Trinkaus, of Moody's.
"And given a weak house price forecast as well, we expect a portion of Buy-to-let landlords to exit the market," Ms Trinkaus added.