Intergenerational Unfairness

[BlokeInDurham]

I was actually suggesting a switch from the education budget to a house building programme, the health budget is non negotiable in any case, an end to useless degrees and a help to real jobs like builders and apprenticeships.

Oughtn't the health budget be negotiable? I am aware that it is politically sensitive, and no-one wants to see people suffer where treatment is possible, but the comparative argument only tends to get made one way: we could build X hospitals for the cost of these bombs (for example).

Everyone (I would hope) would like to give an old lady dying of cancer an extra couple of weeks with her family, but if the cost was lack of adequate housing and a miserable existence for one family for a decade, which is preferred?

It might well be that the populous prefer the health spending, but I don't think the comparison is framed correctly very often. Rather than "Do we offer this medical treatment or provide this other good?" it becomes simply "Do we offer this treatment or not?". People are very prepared to accept the trade-off in their own lives (moreso than the state often!) in choosing other forms of benefit over health benefits: enjoying a drink, smoking, gambling on the purity of some pills, or whatever.

[crashmonitor]

Oughtn't the health budget be negotiable? I am aware that it is politically sensitive, and no-one wants to see people suffer where treatment is possible, but the comparative argument only tends to get made one way: we could build X hospitals for the cost of these bombs (for example).

Everyone (I would hope) would like to give an old lady dying of cancer an extra couple of weeks with her family, but if the cost was lack of adequate housing and a miserable existence for one family for a decade, which is preferred?

It might well be that the populous prefer the health spending, but I don't think the comparison is framed correctly very often. Rather than "Do we offer this medical treatment or provide this other good?" it becomes simply "Do we offer this treatment or not?". People are very prepared to accept the trade-off in their own lives (moreso than the state often!) in choosing other forms of benefit over health benefits: enjoying a drink, smoking, gambling on the purity of some pills, or whatever.

Yep we probably put longevity of life over quality of life and we certainly give Edna's vote a higher weighting than Tyler...and Tyler wont vote anyway.

[pig]

Oughtn't the health budget be negotiable? I am aware that it is politically sensitive, and no-one wants to see people suffer where treatment is possible, but the comparative argument only tends to get made one way: we could build X hospitals for the cost of these bombs (for example).

Everyone (I would hope) would like to give an old lady dying of cancer an extra couple of weeks with her family, but if the cost was lack of adequate housing and a miserable existence for one family for a decade, which is preferred?

It might well be that the populous prefer the health spending, but I don't think the comparison is framed correctly very often. Rather than "Do we offer this medical treatment or provide this other good?" it becomes simply "Do we offer this treatment or not?". People are very prepared to accept the trade-off in their own lives (moreso than the state often!) in choosing other forms of benefit over health benefits: enjoying a drink, smoking, gambling on the purity of some pills, or whatever.

Wow - face palm to infinity.

So now people are seriously debating whether housing should eat the nhs budget. I guess once you accept backing high prices with tax payers money anything goes.

Is there no end to the idiocy of high house prices ?

[Guest]

I'd scrap all housing benefit and all tax credits and instead use the public money to build council estates to house those who truly need it. It worked for my grandparents' generation.

Let's see how much rent BTLers can command once the state is no longer picking up the tab.

[crashmonitor]

Wow - face palm to infinity.

So now people are seriously debating whether housing should eat the nhs budget. I guess once you accept backing high prices with tax payers money anything goes.

Is there no end to the idiocy of high house prices ?

Well I don't accept we have an infinite budget either. You could blow the entire GDP of the country on the NHS, there is no real limit to what you could spend. Meanwhile we have a structural deficit of about 100 bn.

[pig]

Well I don't accept we have an infinite budget either. You could blow the entire GDP of the country on the NHS, there is no real limit to what you could spend. Meanwhile we have a structural deficit of about 100 bn.

Oh really? try telling that to the spivs, the speculators and their friends in government. As far as they are concerned it's to infinity and beyond.

Bit of cash liberated from the nhs could provide a bit of lubrication mind, for buggering up the country. Yes, thinking about it, what is the point of sick people ?

[BlokeInDurham]

Wow - face palm to infinity.

So now people are seriously debating whether housing should eat the nhs budget. I guess once you accept backing high prices with tax payers money anything goes.

Is there no end to the idiocy of high house prices ?

Spending national resources on providing national housing should reduce the effects of the "financialisation" of housing, not increase it. Whatever the exact effect turns out to be of providing a certain amount of extra housing would always be somewhat of a guess within a range, but what precise mechanism would you expect to lead from providing extra housing stock to "fixing" the prices of traded housing at a high level?

[pig]

Spending national resources on providing national housing should reduce the effects of the "financialisation" of housing, not increase it. Whatever the exact effect turns out to be of providing a certain amount of extra housing would always be somewhat of a guess within a range, but what precise mechanism would you expect to lead from providing extra housing stock to "fixing" the prices of traded housing at a high level?

Look - the good news is that the housing problem is rising up the agenda. Hence increasingly frequent attempts to co-opt the debate into an attack on immigrants (we don't have enough houses!) or the NHS (Gidiot told us we need to cut the state!).

The idea of killing old ladies to build houses is a bit of a low but in reality if you spend any time on here, or examining other outlets you begin to realise there is no magic bullet, but rather a general collection policies that address short, medium and long term issues.

We have spectacular market failure. We need something workable while we work towards long term solutions. Short term I think its security and quality of tenure, short to medium term its social housing. In terms of ameliorating intergenerational theft thats the least we could do - but both of these have been attacked by the incumbent government.

Will social housing 'fix' prices ? I am a bit pessimistic because I don't think its solely a 'number of houses' problem. At best I think it could increase upward intertia. The achievable objective of social housing should be to reduce the cost to the public purse of Housing Benefit and increasing security and quality of life - plus a bit of a welcome economic boost.

Edited January 18, 2016 by pig

[BlokeInDurham]

I don't think it's a number of houses issue either, but increasing the stock of housing ought to reduce prices for traded houses, and in any case in isolation will undeniably improve the housing experience of the population as a whole.

I think you fall into the common trap, or political groupspeak, of suggesting the choice is killing old ladies to build houses though. If that were the option, I think everyone would save the old lady. Is that the correct choice description of the choice though?

It might be that in a particular case a more accurate description of the real choice is giving a relatively meagre amount of extra time dying in bed to an old lady (no-one is suggesting taking life away from anyone!) or giving a lifetime of happiness to a family elsewhere in the system. Maybe even it is a choice of giving a few weeks to an old lady, or several decades of life to a young person elsewhere since they won't end up taking their own life. The issue is one of limited resources: where are they best spent? The argument in the political sphere rarely seems to be put in such a manner in relation to health spending almost uniquely. It tends to be framed as whether we need to spend this money as an isolated choice, rather than balancing the urgency of the particular need against other needs elsewhere.

If we could, should we cure someone's cancer?

I don't know. What else could we do with the resources that would take?

[pig]

I don't think it's a number of houses issue either, but increasing the stock of housing ought to reduce prices for traded houses, and in any case in isolation will undeniably improve the housing experience of the population as a whole.

I think you fall into the common trap, or political groupspeak, of suggesting the choice is killing old ladies to build houses though. If that were the option, I think everyone would save the old lady. Is that the correct choice description of the choice though?

It might be that in a particular case a more accurate description of the real choice is giving a relatively meagre amount of extra time dying in bed to an old lady (no-one is suggesting taking life away from anyone!) or giving a lifetime of happiness to a family elsewhere in the system. Maybe even it is a choice of giving a few weeks to an old lady, or several decades of life to a young person elsewhere since they won't end up taking their own life. The issue is one of limited resources: where are they best spent? The argument in the political sphere rarely seems to be put in such a manner in relation to health spending almost uniquely. It tends to be framed as whether we need to spend this money as an isolated choice, rather than balancing the urgency of the particular need against other needs elsewhere.

If we could, should we cure someone's cancer?

I don't know. What else could we do with the resources that would take?

What on earth is going on on this thread ?

Its not so much that its barking mad or cruel. Or that its just a spurious political way of attacking the NHS or indeed the older generation. Its that its a false choice that wholly depends on not understanding the housing crisis.

We are p1ssing away 'resources' to pay mortgages if you are lucky, landlords if you are not. Did I mention housing benefit ? Think Niagra Falls. The related ballooning private debt is apparently an unlimited resource by the way lol!

Did it occur to you that it might be capital better invested directed at building up our home infrastructure rather than filling the pockets of the rentier class with unearned wealth ?

Take a look at Post 106, Irrational Actor.

[Neverwhere]

From Dorkins's previous thread on Homeownership Rates By Birth Year And Age:

[Bear Hug]

Logan's run anyone?

http://www.imdb.com/title/tt0074812/

But I do agree that NHS cuts is not an answer to housing problem. Housing shortage is entirely artificial. There are house price bubble in Canada and Australia. Neither is short on land or resources.

[Dorkins]

From Dorkins's previous thread on Homeownership Rates By Birth Year And Age:

a.k.a. falling living standards visualised.

Looks like the 73-77 birth cohort are topping out at 60% age 40 homeownership, the 78-82 cohort at 50% age 40 homeownership, maybe the 83-87 cohort will top out at 40% age 40 homeownership.

On current trends, once the 1975+ babies become an electoral majority, a minority of voters will be homeowners. With an adult life expectancy of 83 and an age of suffrage of 18 the median voter is aged 50. The 1975 babies will be 50 in the year 2025.

The 2025 general election could be interesting in terms of the politics of housing. Sad that those of us born in the late 70s/early 80s will likely have to wait until we are into our 40s before politicians start seriously giving a toss about our housing prospects, but there we are.

[Neverwhere]

From Ultra-low interest rates could be here to stay, says Bank of England adviser (h/t interestrateripoff):

Gertjan Vlieghe, one of the nine members of Threadneedle Street’s monetary policy committee, the body that sets the official cost of borrowing, said debt, demographics and distribution of income could all depress interest rates.

In his first speech since becoming a member of the MPC, Vlieghe said policymakers should not assume “the future will look like the past” and must “be prepared for the possibility that real interest rates will remain well below their historical average for a very long time”.

This has prompted me to consider that a larger (relative to preceding and following generations) older demographic moving into retirement may inherently contribute to suppressed interest rates (though obviously there are other factors at work as well) by essentially representing a surfeit of savers and investors, and that this may be exacerbated by intergenerational inequity (the younger demographic lack the wealth to compensate). Lower interest rates then encourage either geared investment or investment in gearing (hence both BTL and subprime RMBS) in a search for yield, and the resultant excessive levels of debt suppress interest rates further still (partly because Central Bankers worry about what would happen if they then raised them).

Where this appears reliant on a comparatively poorer younger demographic ultimately footing the bill it seems to be the Lucas paradox writ small: instead of 'capital appear[ing] to flow "uphill", from less developed, poorer, capital-scarce economies to more developed, richer, capital-abundant ones' (Borio & Disyatat (2015)) capital appears to flow "uphill" from poorer, capital-scarce individuals to richer, capital-abundant ones. As with the Lucas paradox itself, which is solved by the realisation that current accounts don't accurately reflect gross capital flows, I think the endogenous nature of finance creation may be obscuring the reality of the situation, at least in part.

For instance, with buy-to-let, while income is tranferred from productive capital-scare individuals to rent-seeking capital-abundant ones, the primary play seems to be to chase capital gains which are generated by other capital-abundant individuals (often other buy-to-letters) bidding up the cost of housing using finance. The amount that can be borrowed is constrained by wages (via rents) coupled with credit conditions, but the interest-only element means that there need not be any real funding of the mortgage prinicipal at all. As giesahoose put it earlier in the thread "the older folk with multiple buy to let's leveraging the properties up and "spending" the equity have actually hollowed out the whole pyramid as they have driven it upwards."

[Frugal Git]

. Probably too far off topic.

Edited January 19, 2016 by Frugal Git

[Neverwhere]

. Probably too far off topic.

As long as it's not about assigning blame then wandering a little off topic seems fine to me, especially if it's broadly related to the subject matter at hand or a tangential matter that's already been brought up in discussion.

[Frugal Git]

As long as it's not about assigning blame then wandering a little off topic seems fine to me, especially if it's broadly related to the subject matter at hand or a tangential matter that's already been brought up in discussion.

Nope, not about assigning blame at all. If you did happen to read what I wrote it covered what can be a very emotive subject - quality vs quantity of life in relation to how we as a society allocate funding/raise money for different medical conditions.

Having reflected, I would rather not cause people distress by sharing an unsolicited opinion about it - although it's something I feel strongly about. Apologies to anyone who read it and felt upset.

[Neverwhere]

Nope, not about assigning blame at all. If you did happen to read what I wrote it covered what can be a very emotive subject - quality vs quantity of life in relation to how we as a society allocate funding/raise money for different medical conditions.

Having reflected, I would rather not cause people distress by sharing an unsolicited opinion about it - although it's something I feel strongly about. Apologies to anyone who read it and felt upset.

I didn't read it at all but I can see both why you would have thought to post it, given the discussion up thread, and why you decided to withdraw it. I had also considered posting something along those lines but held off for similar reasons. Sorry to have made you feel the need to explain yourself.

[Frugal Git]

I didn't read it at all but I can see both why you would have thought to post it, given the discussion up thread, and why you decided to withdraw it. I had also considered posting something along those lines but held off for similar reasons. Sorry to have made you feel the need to explain yourself.

No worries!

[Neverwhere]

Missed this report from the Intergenerational fairness inquiry at the time (it's over a year old) but was reminded about it by a couple of interesting posts from Si1 and Sancho Panza :

Quote

House of Commons Work and Pensions Committee

Intergenerational Fairness, Third Report of Session 2016–17

Summary

An economy skewed towards baby boomers and against millennials

The UK economy has become skewed. Rapid and sustained rises in house prices have concentrated wealth in the hands of those who own property. Far too many young people cannot afford homeownership and instead have to pay costly private rent. Life expectancy has risen faster than anticipated at a time when the large baby boomer cohort, born between 1945 and 1965, are reaching retirement. As the taxes of working people support the retired, the ageing population places strain on those in work. Pensioners have been protected from public spending cuts that have largely been felt by younger groups. Pensioner poverty has been drastically reduced and average pensioner household incomes now exceed those of non-pensioners after housing costs. The millennial generation, born between 1981 and 2000, faces being the first in modern times to be financially worse off than its predecessors.

[. . .]

Homeownership and housing costs

15. Homeownership represents not just a major financial investment—for most people the largest they will ever make—but also a secure and stable basis to bring up a family, to live rent-free in retirement and ultimately pass a legacy to the next generation. A large majority of renters aged under 35, particularly those in the growing private rented sector, remain attached to the aspiration of ultimately owning their own home and expect to become homeowners at some point in the future. For many, however, rising house prices and rents have “dashed their justifiable expectation of an affordable home”. This is a particular concern in London and the South East, where house prices are highest and have tended to grow fastest. Generation Rent, a campaigning group, described the “hoarding” of property wealth by property speculators at the expense of would-be homeowners.

16. The Resolution Foundation, a think tank, estimated that the time required for low to middle income households to save a deposit for a typical first time buyer purchase has increased from between three and five years during the 1980s and early 1990s to over 20 years now. In the meantime, increasing numbers are renting privately or remaining in the parental home. James Sefton, Professor of Economics at Imperial College London, told us that “as the young’s main resource is their current and future labour income, whereas the old have a significant share of the wealth invested in real estate, implicit in this price appreciation is a large intergenerational transfer from young to old”.

17. This overall pattern disguises a considerable degree of variation. Many of those baby boomers who own property may have suffered price falls and perhaps negative equity in the late 1980s and early 1990s, and may well have paid far higher interest rates than borrowers today. The Ready for Ageing Alliance cautioned that a quarter of people aged 55–64 in England are renting while just under half fully own their property. Dan Wilson Craw of Generation Rent told us that people in middle age with little prospect of getting a mortgage were increasingly renting privately and having to claim housing benefit in work. This puts increasing strain on the housing benefit bill.

18. There are, however, clear generational differences in homeownership. Research by the Institute for Fiscal Studies (IFS), a think tank, shows how homeownership rates have declined in successive birth cohorts. Someone born in the mid-1960s, for example, had a 45 per cent chance of owning a home aged 25. This fell to 34 per cent for the mid-1970s cohort and 21 per cent of those born in the mid-1980s. The rate has therefore halved in 20 years. The difficulties in buying a home experienced by those born in the early 1980s contribute to such people being markedly less wealthy than the previous generation were at the same age. The IFS recently found that people in their early 30s have average household wealth per adult of £27,000 - about half the average wealth holdings that people born in the 1970s had at the same age (£53,000).

19. Lord Willetts told us that the housing market is characterised by increasing proportions of renters and people who own their homes outright. The proportion who own with a mortgage, “the getting started bit”, is falling. The Institute for Fiscal Studies (IFS) said that intergenerational effects could be compounded if house prices continued to rise:

The decline in homeownership rates might be thought a cause for concern in itself, but it also has the potential to affect the wealth accumulation of younger generations over their lifecycle if the (leveraged) returns on housing continue to exceed those on other assets, and younger generations are unable to access those returns.

20. For those who do own a property its market value may in reality be secondary to its function as a family home. Steve Webb explained that realising increases in property values, through downsizing and equity release, was still rare. Ultimately, of course, the housing stock currently held by older generations must pass into the ownership of younger generations. The intergenerational transmission mechanism of property is, however, likely to be increasingly based on inheritance ever later in life, or in parental assistance to children in financing house purchases (the ‘bank of Mum and Dad’). This could exacerbate inequality of asset wealth within generations as those lacking parental financing or the prospect of an inheritance risk finding themselves permanently locked out of homeownership.

21. We heard that acting to reduce the cost of housing could have a “transformative” effect, both on intergenerational fairness and on the wider performance of the economy. Philip Booth, of the think tank the Institute of Economic Affairs (IEA), told us “there are not many things that are a silver bullet when it comes to policy but housing comes very close to that ”. The proposed solutions focused on increasing the supply of housing, through an expansion of housebuilding, a relaxation of planning laws and making more efficient use of under-occupied housing. Ashley Seager, co-founder of the Intergenerational Foundation, advocated more innovative solutions, such as incentivising downsizing by the over-60s by removing stamp duty and adjusting the planning system to facilitate “downsizing-in-situ”, whereby a house is split into two flats and the occupier remains in one of them. These policy proposals lie outside the Work and Pensions remit, though should measures not be taken to increase the supply of housing the cost of housing benefit is likely to continue to increase.

22. Housing is central to intergenerational fairness. Rapid and sustained rises in house prices, most marked in London and its surrounding areas, have concentrated wealth in the hands of those who have owned property for decades. At the same time far too many young people have been priced out of homeownership. High private rents make it difficult to save for a deposit. The opportunities that were open to baby boomers to buy a home with a relatively small deposit are closed to today’s young. Though wealth will be passed to younger people through inheritance, this risks exacerbating inequality within generations. Successive governments have palpably failed to act effectively on the housing market. Alongside housebuilding, there is a strong case to consider innovative policies to encourage downsizing and to more efficiently distribute the existing stock. Such measures lie outside our remit. The manifest problems in the housing market, however, form the backdrop to much of this Report.

 

[Dorkins]

2 hours ago, Neverwhere said:

 

Quote

The millennial generation, born between 1981 and 2000, faces being the first in modern times to be financially worse off than its predecessors.

 

I'll never understand why they always use the future tense with this "if we don't do something young people could be the first generation to grow up poorer than the previous one" line. The data are in, it's happening now, we are poorer!

Edited February 17, 2018 by Dorkins

[BorrowToLeech]

On 1/18/2016 at 4:33 PM, pig said:

if you spend any time on here, or examining other outlets you begin to realise there is no magic bullet, but rather a general collection policies that address short, medium and long term issues.

Making the problem seem intractable is only a way of avoiding it.

Solving the housing crisis is easy. We debate ways of doing it precisely because there are so many.

The reason it is made to seem difficult is because a minority of people profit from the crisis and do not want it to end. 

There are magic bullets, but you have to shoot them into the heads of landlords. 

Metaphorically, of course. 

[macca13]

On 18/01/2016 at 2:01 PM, crashmonitor said:

Well I don't accept we have an infinite budget either. You could blow the entire GDP of the country on the NHS, there is no real limit to what you could spend. Meanwhile we have a structural deficit of about 100 bn.

When you work out how much money they are wasting on buying drugs that are out of patent and could be manufactured for pennies, combined with agency staff cost and Pfi hospital contracts.. it’s a joke how much of the money is wasted.. 

[iamnumerate]

On 2/17/2018 at 4:05 PM, Dorkins said:

I'll never understand why they always use the future tense with this "if we don't do something young people could be the first generation to grow up poorer than the previous one" line. The data are in, it's happening now, we are poorer!

Surely people born in the 70s were, I only know one person who lives in a better house than their parents, in most cases it is the reverse despite earning more.

[Dorkins]

10 hours ago, macca13 said:

When you work out how much money they are wasting on buying drugs that are out of patent and could be manufactured for pennies, combined with agency staff cost and Pfi hospital contracts.. it’s a joke how much of the money is wasted.. 

If nobody is manufacturing a cheap generic version of a drug where are the NHS supposed to buy it from? Is it really wasted spending if there's no cheaper alternative?

Edited February 19, 2018 by Dorkins