The latest report from the Institute of Fiscal Studies (IFS) on home ownership makes grim reading for our millennials (25 to 34 year olds). The number of young adults with a household after-tax income of between £22,200 and £30,600, owning their own home dropped from 65% in 1995 to 27% in 2016. During the period under study (1995-2016)house prices on average have increased by 152%. Their wages, however, have increased by only 22%, while GDP (Gross Domestic Product) per capita has increased by 47%. Our poor millennials haven’t even received their fair share of the rising GDP.
It is scandalous that such a basic need for shelter should become so unattainable for so many of our young adults. Of course, with rising house prices comes a rise in the rent one has to pay for adequate accommodation. Currently households are typically spending over 30% of their after-tax income on rents. Even with this expenditure they are likely to be living in overcrowded and smaller places than their parents.
The barely affordable cost of keeping a roof over one’s head impacts negatively on the health of adults and their children. There is also a wider cost to the country’s economy. With so much of the family’s income going to landlords or banks, less money will be available to spend on goods and services resulting in higher unemployment and a reduction in the country’s GDP. Additionally the taxes (VAT on goods and services) received by the government will go down. This, of course, means there will be less money to spend on essential services that are vital for a functioning civilised society, such as the NHS, education, police, roads etc.
Low income households and those on benefits can claim housing benefits paid by the state to private landlords. The bill amounted to £24billion in 2014/15. It is an outrage that tax payers money is helping to enrich the already wealthy landlords. Anyone with a property to rent out is well off when one considers the rapid increase in house prices and rents. The alternative is for the state to build more council houses. In a previous article in the Huffington Post I wrote:
“Local councils provided well-built houses on secure tenancies to those who could not afford to buy. Margaret Thatcher, in 1980, initiated the sale of council houses at a substantial discount, under the right-to-buy scheme. At the same time, local councils were prevented from building replacement houses. This led to a massive depletion in the nation’s council housing stock. That decision judged on value-for- money argument is indefensible. An adequate supply of social housing will provide people with security of tenure, and has the advantage of competing with the private renting market, bringing rents down to an affordable level. It will also save the taxpayer money in the long run.”
The Tories answer to the housing crises has ranged from the non-existent to the misguided. Their help-to-buy scheme for England works as follows: The purchaser need only provide 5% of the price of a newly built home as a deposit. The rest of the deposit (20%) is loaned to the buyer by the government. The housing charity Shelter identified the problem at the heart of the scheme thus::
“Drawing on official statistics and analysis, this research finds that Help to Buy has added around £8,250 to the average house price. In other words, it has helped a small number of people to buy, at the expense of worsening the overall affordability crisis for everyone else.”
The Labour Party’s answer to the housing crisis is to tackle the problem of the supply of affordable housing. It makes the following promise in its manifesto:
“Labour will invest to build over a million new homes. By the end of the next Parliament, we will be building at least 100,000 council and housing association homes a year for genuinely affordable rent or sale.”
The centrality of housing to all our lives is well put by the Labour Party thus:
“Home is at the heart of all of our lives. It’s the foundation on which we raise our families, the bedrock for our dreams and aspirations. But for too many people, the housing pressures they face are getting worse, not better. Britain has a housing crisis – a crisis of supply and a crisis of affordability”.