One of my favourite ‘angry’ songs from the first Tom Robinson Band album (Power in the Darkness) was ‘I’m Alright, Jack’. The song always conveyed to me the sense of ‘pulling up the ladder’. I was reminded of this reading the new report by the Resolution Foundation: ‘Living Standards 2016‘. In the report they argue that the UK housing ladder has been ‘withdrawn’.
The Resolution Foundation argues that only now are living standards returning to pre-crisis levels. The study focuses on the experience and position of low to middle income working age households. They stress the cumulative impact of long term wage stagnation only recently recovering though ‘flattered’ by low inflation. FRS household survey data rolled forward to 2015 suggests that mean household incomes remain 1.6% below their 2009 levels though they are rising relative to recent years (median income has been doing a little better). Household type (pensioners have done much better since 2002 than working age households), tenure (though with a mortgage facing very low interest rates have done much better than those renting) and place (London is the second best region in terms of household income growth before housing costs but at the bottom of the pile after housing costs).
For the Resolution Foundation these points indicate strongly the central role of housing in affecting incomes and allied to the intergenerational differences in outcomes, helps explain the ‘drastic changes’ to the levels and rate of home ownership. They point out that 1/3 of home owners are aged over 64 (compared with a quarter in 2000) and 16-34 year olds account for just 10% of owners compared to 19% in 1998. They acknowledge that the trend was downward pre-dating the economic crisis but stress that it is among low to middle income households that the reversal has been greatest. They predict that in comparison to 2000 when around half of such households aged under 35 owned their home, today it is more like a quarter and will be just 10% in 2025 if trends continue and only 5% in London. The authors argue for policies to successfully implement the national living wage, reverse the ‘most punitive’ aspects of welfare reform and pursue a sustained and enlarged housebuilding programme.
These figures are important facts that we should be aware of. I would make a couple of additional comments. First, we stressed in the 1980s and 1990s that some national policies have important regional implications, such as the spatial impacts of mortgage interest tax relief. Today, the same can be said about the tightened regulation of the mortgage market since it is deposits that play such an important role rendering home ownership inaccessible – and that has huge spatial consequences particularly for overheated housing markets. Ability to meet such deposits remains arbitrary and increasingly a function of previous generations’ success in ‘winning’ the housing market game and recycling the proceeds to their children or grandchildren. This it seems to me is where a fundamental constraint on home ownership bites and where policy needs to be more innovative and creative (as we will continue to need a more regulated mortgage market compared to a decade ago).
Second, I return to that question about millennials and their changing attitude to housing and the greater insecurity of job tenure in the labour market, to renting in particular, and issues of location, and life-work balance. We need to understand housing demand, tenure aspirations, choices by households and the limits to changing these through policy interventions much better than we do. Aspirations studies are important in this but we do critically need a better understanding of aspirations modified by constraints and actual or likely economic choices. As I have argued before my sense is that the rental market is highly segmented and differentiated but that for a growing number of younger households who do not know anything else other than the parental home – it is is increasingly normal and often quite satisfactory as a housing outcome. It is clearly less well suited for other groups like families but if anything policy work needs to focus on lengthening tenancies and not by simply seeking to ‘solve’ home ownership without tackling the down payment issue.