Renting into retirement: The future cost of the affordable housing crisis

With homeownership slipping further out of reach and rental prices climbing, a new economic divide is emerging – one that separates renters from homeowners not just today, but deep into retirement. L&G’s latest research looks at how deep the fault line from the housing crisis goes.

Our Savings to shelter research surveyed 4,411 UK pension savers and revealed widespread concern over affordable housing – 97% of those surveyed see it as a critical issue.

More renters, in particular, ranked it as a top priority and expressed greater pessimism than homeowners about future prospects.

Property ladder to retirement

In the last year alone, rents across the UK surged by an average of 9%. Renters can also spend a higher proportion of income on housing – 20% of UK tenants spend over half their income on rent.

However, with the average UK house price now towering at over 8x the average income, it’s putting ownership further out of reach for many renters.

In fact, in our research 20% of renters said they don’t think they’ll ever be able to afford to own a home. For many, renting is no longer a stepping stone. It’s the permanent reality.

This impacts renters for years to come. Renters accumulate no housing wealth and may need £400,000 more in retirement savings to match homeowners. This disparity stems from the rising cost of rent and the likelihood of future increases – factors that don’t affect those who own their homes outright.

We examined whether our research respondents perceived a financial gap in the savings required for renters versus homeowners approaching retirement.

Among pension savers, 8% of renters said no extra savings would be needed, compared with 6% of homeowners. For those that selected a monetary difference, around one in 10 of both segments said that renters would need to have saved over £250,000 more than their homeowner counterparts – well below actual projections.

Homeowners entering retirement can tap into property wealth by selling or downsizing – freeing up equity to enhance savings or support future care needs. Renters, by contrast, don’t start with the same financial cushion.

The Pensions Policy Institute forecasts a significant rise in the number of households renting in retirement, with projections indicating a potential increase to 3.6 million by 2041.

This growing trend raises serious concerns for those aspiring to homeownership and underscores the urgent need for more affordable and sustainable housing solutions.

Promise to progress

In 2024, the Labour government pledged to "build, build, build" to tackle the housing crisis – and followed through with a £39 billion investment in social and affordable housing, revealed in the 2025 Spending Review. Alongside the Mansion House Accord, this marks a shift from ambition to action.

Yet lasting impact will require private investment. For asset managers, UK affordable housing presents a unique opportunity to seek inflation-linked income, potential long-term returns for pension savers and meaningful social impact.

Future foundations

These findings reinforce a broader truth: the cost of the affordable housing shortage ripples across decades and generations - from young renters to retirees.

With more households expected to rent through retirement, housing affordability must be tackled now.

We can’t place the full burden on individuals. The decision at Mansion House in June 2025 to make the Mortgage Guarantee Scheme permanent is a welcome move for those trying to get on the housing ladder.

But we also need to support the people who may never buy by increasing the supply of affordable homes and putting long-term pension capital to work in building them.

Many DC savers may not appreciate how housing status shapes retirement. Many pension providers (including L&G) offer digital tools with tailored insights and prompts to help savers navigate retirement journeys as renters or homeowners.

The ‘Savings to shelter: Pensions’ role in addressing the UK housing crisis’ research report can be read here.

Interested in reading more about DC pensions and investments? You can find our latest content on our designated DC blog page.