Tuesday, Mar 16, 2010
Long article, but well worth a read
Independent: No place like home - The generation who can't afford to buy
My parents bought their home in 1980 for £32,000, with a mortgage of double their income. If I were to buy the same house now it would cost me £350,000, and I would need a mortgage ten times my income. And I have a decent job, unlike a lot of other young people in this economic climate. The average age of first-time buyers in the UK is now 38; at the tail end of our twenties, my younger brother and I are looking at another decade each of letting. Little wonder, then, that we're being called "Generation Rent".
Posted by little professor @ 10:09 AM (2468 views) Add Comment
33 Comments
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1. andrew said...
This has been the case since circa year 2000.
Depressingly it does not look like anything will change, welcome to our new classless society.
2. mark wadsworth said...
As Andrew says, the cut off point was around 2000 or so. Everybody who was lucky enough to be in their late twenties before then got a house fairly cheaply; from there on in it was disaster.
Which is why there is quite a sharp cut-off between owners and tenants in terms of age. I'd guess that (for example) two-thirds of forty-year-olds are home-owners, but only a third of thirty-year-olds.
3. nomad said...
Quality article. And this would make a difference.
"Research by unbiased.co.uk recently found that two million homeowners may this year sell their homes and start renting instead, many citing geographical mobility as one advantage of being a tenant."
4. need-a-crash said...
While this article starts well and makes some very valid points like:
"Does anyone take time to consider how despairing the current generation feels by being born too late? What about the consequences for our society, now and in the future?" the consequences being;
"...without the possibility of a roof over our heads, which of my contemporaries is going to want to start a family anyway? No wonder so many first-time parents are now in their late 30s and early 40s." and;
"The problem with more affluent parents helping their children to buy a home, he explains, is that it makes home ownership "more and more hereditary".
It simply ends by saying we need to build more houses, which surely from what we all know about reckless bank lending over the last decade and the fact that anyone able to MEW can easily afford more than one property, has to be only a very minor part of the problem. In fact he even writes this in the article, saying of his stepfather, "He's not by any means a rich man, and yet he's become a miniature property magnate without even trying."
@2. mark - you're quite right, there is a sharp cut off and I think this is perhaps why this issue is not taken that seriously. My elder sister is the right side of that line, so my parents perhaps understandably take the view that if 'she managed it, why can't I'. Likewise most politicians and anyone else over the age of about 35 can't really see what the fuss is about.
However as more and more generations leave university /school with no hope of a stake in society this will become more of an issue.
5. Simon said...
Depressingly true article .
No amount of house building will be able to keep up with the open door immigration policy the government implemented to recruit more core voters .
It's difficult to predict where all this is heading but it looks to be from major catastrophe to absolute disaster .
6. tyrellcorporation said...
'However as more and more generations leave university /school with no hope of a stake in society this will become more of an issue.'
yes but the Labour high command will long since be retired so don't expect any serious political intervention for a decade or more.
7. andrew said...
need-a-crash, agreed, I am just not sure exactly where this is supposed to be heading, it is such a shortsighted set of policies that it beggars belief that we have reached this position at all.
8. mark wadsworth said...
NeddACrash, I'd have one minor quibble with what you say right at the end: "... with no hope of a stake in society"
I think what you mean is "a stake in ever rising house prices". It must be clear that younger people do have a stake in 'society' as they have jobs, the right to vote, the right to rent a property or buy shares and so on. Which is yet another argument for shifting taxes from income to house prices (which would have the added bonus that the economy would do better and house prices would be low and stable) - that evens things out between generations - like in the 1950s and 1960s.
9. letthemfall said...
This article can't quite make up its mind about the cause of high house prices or rents. At the end it concludes that there is a shortage of houses, even though there are good reasons to doubt this. The rest of the piece is a discourse on economic inequality, with the implication that it is the older people who are somehow the problem. In a sense they are, but only because they are older and therefore are more likely to have benefited from the growing inequalities that date back to 1979. (Many older people are actually worse off.)
The combination of the Thatcherite ethos (produce material wealth at all costs) and globalisation (prolific cheap labour) has caused immense inequality in our country now. Since so much money is now concentrated in land and housing, it makes sense, as mark w says, to redress this through taxation. Similarly for very high incomes.
10. need-a-crash said...
Mark - "no hope of a stake in society"
Ok I accept it's perhaps not quite that bad. Although I think the article uses these words and means that due to the lack of security in rental property and the knock-on effect not owning a home has on people's ability to start families, then you are left out of quite a few aspects of our society by virtue of not owning property.
Admittedly we can still work and vote. However as you never tire of pointing out :) the strength of Home-owner-ism in this country is so strong amongst our ruling classes and our ability to influence govt policy so limited, that our best hope of changing the system is financial armageddon.
11. mark wadsworth said...
NAC, OK, it's somehow nice to own a house before you have kids (and all my policies are geared up to making this a viable option again, like in the 1950s to 1960s), but Mrs W and I have got two young children and we're renting, it's not so bad, really.
12. timmy t said...
I have a 2 yr-old and we rent in a rural spot surrounded by fields - nearest neighbour 500 yards away. They've just approved the build of 2500 houses in those fields so we will be moving on in due course, safe in the knowledge that the price drop our house will no doubt suffer ain't our problem. Love it.
13. tenant super said...
I bought my place in 2000 at the age of 23, as I had been ripped off by dodgy landlords once too often and a mortgage was cheaper than renting. Mr TS bought his place in 1999 aged 29. We both paid about 2.5 times our salary at the time and put down a 10% deposit. We have both overpaid our mortgages and now have 77% and 72% equity respectively in our homes.
Yet we are not 'winners'. It is misleading to say that anyone who bought before 2000 is okay. Combine our equity and we would still have to borrow around 5x our joint salary to upgrade to a three bedroom Victorian terrace in a half-decent area in London. We could move to a semi in suburbia but then we would have to pay for a season ticket to get into work as well as losing two hours of each day with our faces wedged into somebody's sweaty armpit on the overcrowded trains. We would rather the price of our own flats went down by 50% and the price of the house we want to buy goes down by 50% too.
If you have a one/ two bedroom flat somewhere you don't mind living when you're young like Hackney but you can't upsize to a family home in an area with decent schools, then you are just as unable to start a family as those completely priced out.
14. mark wadsworth said...
Tenant, yes, agreed. Maybe I should have made it clear I meant "buy a house suitable for a family". If you bought a one- or two-bed, then you haven't gained much at all. I bought a nice three bed terrace near a Tube station in East London in 1998 for £95,000 (and that was after prices had been ticking up for a couple of years), that seemed like a good deal to me at the time.
In fact, I knew it was a good deal because the insurance rebuild costs were £110,000, so even if we knock off 20% for insurance company over-charging, I got the "land" element virtually for free. And relatively high council tax made it even cheaper.
15. taffee said...
The title of the article makes me even more sure that its totally unsustainable and a housing crash is upon us.how can the average ftb be 38 years old? in an apparent worst recession since the 1930's?
16. tenant super said...
Indeed! There is a little regret on my part that I didn't borrow 3.5 x my salary and buy a terraced house but at the time, I figured a large-ish flat was more suited to my lifestyle, easier to clean and left me with more money at the end of the month. We didn't expect prices to rise at the rate they did and thought we would just upgrade when our lifestyle changed. Mr TS opted for a 2 bedroom garden flat along the river Lea and what amuses me most is that his flat is much bigger than many of the (un)affordable shared ownership housing schemes that people are encouraged to buy and considered appropriate for children.
Of course " a house suitable for a family" also means in a catchment area for a reasonable school unless you can afford private fees.
17. mark wadsworth said...
Tenant, as to education, I've got a one-word policy on that: vouchers.
18. tenant super said...
I agree ... vouchers combined with freeing State schools from LEA control would mean schools competing for pupils and a general improvement across the board. As we're likely to be forced into using private primary schools I resent paying twice particularly as we are not wealthy and would have to make a lot of sacrifice to meet the cost. We'd put them in for scholarships or the grammar schools in Orpington but as they generally take the top 1-1.5% in ability this is not given! Before sterling collapsed an Irish boarding school would have cost us only £7-10k pa but even now at £10-14k pa it is still the best solution for us personally if we have children.
Alternatively, I may just encourage my children to not bother with university or work, start a family young and claim housing benefit. They can while away their days with all the pleasurable activities I wish I had more time to indulge in; reading, writing, visiting museums and galleries, meditation meetings, fishing, free public lectures, visiting online forums and b!tching about the state of the country.
19. clockslinger said...
Mark W, well said @ 6. To conflate the two (stake in society with stake in property prices) is exactly the mischief we need to address...(as you say through taxation on property price gain would do it exactly). Dismantling this pernicious and growing misconception will only come about through plenty of noise and pressure from those who know they have a stake and a say in this society...irrespective of owning or wishing to own a Persimmon constructed dream. To drift into thinking one does not have an equal stake in the way things are and can be in the future based on having a mortgage is the final victory of that loathsome Thatcherite home owning materialist philosophy "you are what you have" and you are worth what you earn. What a sorry symbol of what this so called democracy has become. The really worrying thing is that the acceptance, internalisation and reiteration of those values is the fruition of that very project. It is scary in the same way as in Orwells 1984 when Winston realises he really loves Big Brother! Control the thinking and you control everything.
NAC @ 4...what is to MEW. Can I do it or do you mean the noise my little Fluffy makes?
20. clockslinger said...
Sorry, MW @ 7
21. nickb said...
Vouchers for education has always seemed indefensible to me. The problem is that even if you ended up with better schools in the long run, through schools going bust and others having to expand, you'll have horribly disrupted the education (and lives) of the kids who have to change. It's also unrealistic to expect good schools to expand - what a hassle and expense. They will simply find ways to practise greater selection... either directly favouring the richer "good" parents or selection through the housing market.
22. mark wadsworth said...
Nickb: "through schools going bust and others having to expand, you'll have horribly disrupted the education (and lives) of the kids who have to change."
Where do you think there is more continuity and where do you think there is more disruption and eternal reorganisation - in the private sector or in the state sector?
I'm in favour of universal, flat rate welfare - and the arguments in favour of a Citizen's Income or a Citizen's Pension are much the same as the argument for schools vouchers (like in Sweden).
23. need-a-crash said...
@18. Tenant super - "Alternatively, I may just encourage my children to not bother with university or work, start a family young and claim housing benefit. They can while away their days with all the pleasurable activities I wish I had more time to indulge in; reading, writing, visiting museums and galleries, meditation meetings, fishing, free public lectures, visiting online forums and b!tching about the state of the country."
Take note Clockslinger @19. This is what you get after 13yrs of Labour welfarism and housing bubble. As I seem to recall it was the Tories who at least had the good sense to allow their (rather small) housing bubble to deflate quickly in the early 90's while Labour, the so called party of the people, has used taxpayers money to bail-out the rich, rich bankers and rich homeowners.
24. tenant super said...
@ 23 Need a crash
This is why I believe the bubble is unsustainable. Once the 'middle classes' (a vast diverse catchment these days) realise they're being mugged-off and start chosing welfarism as a better lifestyle than working, you either get rid of welfare (esp. housing benefit) which will reduce rents which will in turn subdue house prices or you start building/ deflate the bubble so once more, earning buys you a better lifestyle (i.e. decent accomodation at a reasonable price) as the status quo will become unaffordable.
It is slightly over-simplistic for me to complain that my schoolfriend L who grew up on a council estate had became a single mother at 17 and now lives in a three bedroom council house in Surrey has a 'better' life than me because she lives in a nice area with good schools and has a three bedroom semi with a garden. I have travelled the world, enjoyed an excellent education and am utilising all my innate skills. L's life is sky TV, fast food and the odd night out on the town. As a 20 a day smoker who is overweight, she is likely to die young.
However, as a young person of average means, if you had the cultural capital of the middle classes and the welfare lifestyle of the underclass, your life would be 'better' than if you worked. Not only because you would have better accomodation but because you would be eligible for means-tested bursaries for private schools and probably universities in the near future. Also you'd stay at home and bring up your children well instead of dumping them in substandard day care and returning home exhausted.
Your budget would go further than most welfare recipients as you would not smoke, you'd know how to cook food from scratch (which is cheaper than buying frozen cr@p) and you would not buy Sky TV and lottery scratchcards, you would also be more likely to be able to manage money, fill in forms to negotiate the welfare system to your advantage and earn a few quid on the side and get away with it.
This wasn't true for my parents' generation who, if they worked in white collar jobs would live in a nicer area and one parent could stay at home. No-one resented the council-house dwellers too much because their estates were not exactly salubrious. Now a working family can often only rent an ex-council house anyway.
25. shipbuilder said...
tenant super, I'm sold!
You're spot on, though. I always find it amusing when people avoid taxes/invest in BTL/exploit loopholes in the system, excuse bankers for doing the same and justify it with 'well, it's the government's fault - if the opportunity is there, why not?' and then get all hot under the collar when those on benefits do the same.
As you say, there was never the rage about benefits, nor public sector workers, that there seems to be now. To me that says there has been a steady decline in private sector pay, satisfaction and rewards rather than anything else and yet pay and profits of large private sector companies have rocketed.
As has been said so many times, we really need to start asking why this has happened instead of trying to knock everyone else down.
26. tenyearstogetmymoneyback said...
need-a-crash said
"However as more and more generations leave university /school with no hope of a stake in society this will become more of an issue."
Assume they keep their stake at the Ballot box this could have an intersting effect on politics.
Just imagine if a party proposed abolishing planning permission. I can't see their popularity going down over the years.
27. voiceofreason said...
@26
Trouble is that those voters don't even realize that they are being conned / exploited.
E.g. they all believe the "UK is overcrowded" myth.
They need it to be explained to them that they are being herded into brownfield sites and town centres by the vested interests.....
28. tenant super said...
'Atlas Shrugged' was originally going to be entitled 'The Strike' since the book narrates society's collapse as the government increasingly controls industry while society's most productive citizens, gradually disappear, that is, go on strike.
I believe there will come a time in the not too distant future when we will see a similar strike when most young middle earners will be no longer be willing to work to support older wealthy home-owners, bankers and the corporate and political elite above them and the welfare-dependent below them. As it is easier to join the welfare class than the wealthy elite, this is where most will go (in countries like India where there is no welfare you have to work even for an exploitative wage or you can't feed your family and you would starve but here there's a choice). There will also be social unrest although I am unsure of how the 'Online-Petition' generation will galvanise themselves!
I think whatever government will eventually have to face up to the crippling unsustainability of having house prices at 10 x average income. As need-a-crash says 'welfarism and housing bubble' is a toxic combination and we are fast heading for the rocks.
29. Younger Gen said...
Mark, regarding the 'no stake in society' comment, for me this is not just related to property ownership, and I expect not for others of 20s-30s generation. I cannot think of any policy that I have heard over the last 5 years that was aimed at 'wooing' my vote at the ballot box, politicians seem to ignore us completely. Even policies aimed at helping low income groups seem to be confined to low-income families - look at the damage done with the withdrawal of the 10p tax rate, which was mitigated (according to the government) by working family tax credits!? Similarly other policies seem to help those with mortgages and make life more difficult for those renting. We seem to be battered with student loans, higher taxes and no thought about how we can be involved as stakeholders of society, and no-one seems to be worried about losing our vote or willingness to work and pay taxes to the same society. Is this all our fault, apathy at the ballot box??
30. smugdog said...
Super T @ 24
"L's life is sky TV, fast food and the odd night out on the town.
As a 20 a day smoker who is overweight, she is likely to die young.
Do you think she really appreciates what a good and supportive friend she has?!?
How right you are though, many feel they are owed a standard of life without contributing.
Will they (when it stops), or will we (when it increases) riot like the French?!?
31. tenant super said...
Smugdog, I used to talk like a daily mail editorial and say that people like her should get nothing or be forced to work etc. But I see now that it's all about formation when you're young. Her dad's an Irish labourer and her Mum worked part time as a nurse - I used to go round their house all the time as a teenager, mainly because they were so permissive, letting us drink and smoke. They were loving parents but there were no books in the house and they never passed comment on her school reports. There was simply no expectation there. I tried to persuade her many times to go back to college but there really is little point. She's never going to raise her standard of living much by working full time. When her youngest started secondary school she did work part-time, 16 hours per week cleaning as under the tax credit system this made sense.
As a libertarian, I do think the Welfare State needs to be abolished but I don't have vitriol towards those who milk it. If housing benefit were axed, it would put downward pressure on rents and house prices. If housing bubbles are not encouraged and taxes are reduced due to a vastly reduced welfare bill then welfarism is no longer a sensible choice.
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