Following the announcement of a new ‘Millennial Railcard’ in yesterday's budget, TheHouseShop.com, have crunched the numbers to assess the impact this could have on rental markets both inside and outside of the capital.
Currently, the high cost of travel is deterring young people from moving outside London to areas like Maidstone and Reading where rents are significantly cheaper. With many young people struggling with affordability, the prospect of a dramatic decrease in monthly rent payments is hugely attractive. But with a monthly railcard from Reading to London currently costing a whopping £413.60, the money saved on rent is effectively wiped out.
Assuming that the new Millennial Railcard will work in a similar way to the existing 18-25 young persons’ railcard – 26-30 year old Millennials could expect a discount of up to one third on their commute. This could have a significant impact on re-balancing the trade off between lower rents and higher travel costs in favour of suburban commuter hot-spots on the outskirts of London.
The table below shows the average monthly rent per person for a 2 bed home and the monthly cost of travel for a number of locations varying from Zone 2, right in the centre of London, to as far away as Maidstone. It is clear to see that with current travel costs, the financial saving from moving further out to find cheaper rents is almost entirely wasted by the disproportionately higher cost of travel. When the new discount is applied, however, the savings shift in favour of these potential new commuter hot spots.
Nick Marr, co-founder of TheHouseShop.com, comments: “Many young people working in London today are struggling to afford the high cost of living, as their wages fail to keep up with ever increasing rents. Our recent research found that 1 in 4 private renters currently spend more than half their monthly income on rent – leaving little disposable income at the end of each month.
As you move further outside the capital, rental prices begin to decline significantly and tenants can end up paying almost half as much as they would for a central London postcode. However, when you take into account the cost of travel, this saving is almost wiped out – making the argument to move further afield for cheaper rents totally redundant.”
The launch of the new Millennial Railcard could offer discounts of up to a third on travel, which would have a significant impact on overall costs for young people in search of more affordable cost of living outside the capital. An unintended positive impact of the new railcard could be a boost to rental markets in outer areas like Maidstone, Reading and Winchester, as the savings balance shifts in their favour.
The chancellor has had to balance the demands of landlords, who are typically Conservative voters, with the needs of young people priced out of the market. While he may not be able to do anything to lower rental prices for Millennials, policies like this can have a real impact on cost of living for thousands of young people across the country.”