Steve Collinge, MD at the Insight Retail Group, shares his thoughts on how the Home Improvement sector can harness the opportunities posed by the renting generation.
The correlation between house-moves and the home improvement industry has been well-known for some time.
You could even say that house-moves have been the fuel that has powered our market for decades. When we’re moving home and house prices are rising, we’re happy; but when we stop moving house, like we did between 2008 and 2010, the industry catches a cold, big time.
And I’m sorry, but I just don’t buy the industry commentators who say, “that if we aren’t moving, then we’re spending the same amount of money improving our homes” – we simply aren’t. When we move into a new home (if funds allow) many of us will spend the first three years making it ours, decorating most rooms and where needed replacing the kitchen or bathroom. When we choose not to move and rather to improve our current home, we take on one or maybe two projects during that same period.
In terms of what we spend on home improvement materials, we only spend around a third of what we would have spent had we actually moved to a new house.
Data released earlier this month by Rightmove, the largest home-moving website in the UK, confirmed that July 2020 had been the busiest month for Homebuying for 10 years, with agreed sales of £37bn, £12bn more than during July 2019!
Pent-up demand? Undoubtedly. Consumers looking to escape the cities and achieve a better work/life balance? Probably. Will it continue at this pace, unlikely?
But behind these figures, home ownership in the UK has collapsed for adults in their prime working age. According to the Office for National Statistics, those in their mid-30s to mid-40s are three times more likely to rent than 20 years ago. In a reflection of surging house prices and a lost decade of wage growth since the financial crisis, one third of 35-44 year olds in England are now renting from a private landlord, compared with
fewer than one in ten in 1997.
In Ireland, it is a slightly different picture. According to the property website Daft.ie the number of homes available for sale at the beginning of August 2020, fell to its lowest level in 14 years as COVID-19 caused the property market to stall.
Whilst there were only 19,538 properties for sale nationwide at the beginning of August (-22% on 2019 levels) availability in the rental market was skyrocketing. Countrywide, at the beginning of August, there were 41% more properties available across Ireland for rent and 92% more in Dublin, with 3,000 homes available, compared to only 1,600 a year earlier.
According to Daft.ie, the increase in rental supply is said to be linked to landlords withdrawing their rentals from short-term listing sites such as Airbnb and offering them on Daft.ie instead.
Recent reports have given stark warnings that the rental sector in Ireland is out of control and many families who are forced to rely on the sector as their only housing option are increasingly at risk of losing their homes as the cost of renting, particularly in Dublin, continues to escalate.
And it’s even tougher for the younger generation. Typically, they have a good education and excellent career prospects. They’ve not experienced a recession or negative equity and if they’ve spent time abroad, it’s normally through their choice as opposed to necessity. Yet, this generation have challenges in ever being able to afford to buy a home of their own.
In 1991, 180,353 households in Ireland were renting (45% private and 55% local authority), by the time of the Census in 2016, this had increased to 469,671 households (70% private and 30% local authority). During the same period, the number of owner-occupied households increased from 808,385 to 1,147,552. Today, 30% of households are renting their home compared to 20% 10 years ago.
For the Home Improvement industry, and particularly the retailers, renters have always been a problem and a consumer group that we’ve found hard to target and even harder to speak to. Partly this is down to the size of the opportunity; it’s an obvious point to say that renters spend significantly less on their homes and gardens than homeowners. Whether it’s restrictions applied by landlords or simply a lack of appetite to improve and add value to a property that will never be theirs. Spend levels have historically been low and focused predominantly on categories such as furniture and homewares.
A new TV Show
But as the proportion of people renting continues to grow, we’re either going to have to accept a contraction in the Home Improvement market or perhaps change the way we think and begin working harder to inspire and engage with this growing population. But how does the industry tap into this growing opportunity and capitalise on all those homes and gardens that could be improved?
Out of interest, the BBC has recently commissioned a unique, new home improvement TV show targeting the millions of young people in rented accommodation. Launching on BBC Three this Autumn, Flat Out Fabulous, is produced for the BBC by Ricochet and features talented designer Whinnie Williams, who believes that everyone has the right to a stylish home, no matter what their budget is.
She’s about to prove that home renovations don’t have to cost a fortune by helping housemates re-design and transform a boring living space.
IKEA have successfully targeted this segment for some time and have worked hard to provide cost effective, fashionable ranges that appeal to Generation Rent. But I believe there is so much more for us to do, than just re-positioning our products to appeal to a younger generation of renters.
A Range of Services
For some time, I’ve been thinking through the opportunity for brands to offer a range of home improvement products and services to landlords. Landlords are always looking to increase the income from renting and to improve their returns. Renters are frustrated that they can’t make their homes their own and the fact they’re restricted by what landlords allow them to do.
What if the largest brands in Ireland worked together? What if Google and Dulux and Yale and the other big names were to offer a package of measures that landlords could offer to their tenants, payable through an increase in the monthly rent?
Tenants could have their rental property painted in a colour of their choice before they moved in and repainted again every two years for a slight increase in their monthly rent to cover the cost. The paint companies could create a range of ‘landlord friendly’ colour cards with a limited colour-pallet.
Smart Home security systems and voice activated devices could be added to properties if tenants were prepared to pay a monthly ‘subscription’ to cover the installation and on-going costs.
Landlords could offer rented furniture packages from Woodies or IKEA and other retailers for those tenants who would rather rent than buy furniture.
As the cost of construction continues to escalate in Ireland and owning a home of their own becomes less and less likely for the younger generations, as an industry it is time for us to think differently. Maybe the new BBC show ‘Flat Out Fabulous’ will change the game and become the Changing Rooms of the 2020’s, delivering a huge increase in engagement with DIY and subsequent sales for the industry. Even if it does, I believe there is a responsibility with the largest retailers and brands to act now, think differently and find new ways to sell their products and services to a completely new audience who are just waiting to make their home their own.
Steve Collinge is an international speaker, influencer, retail commentator and is Managing Director of Insight Retail Group Ltd and executive editor of Insight DIY. You can follow Steve on LinkedIn and on Twitter (@InsightDIYSteve).