The outlook for Generation Rent

News

For a sizeable minority of Oxford students, that wonderful hazy interlude between school and “real life” that is university is rapidly approaching an end. Chances are that if you’re a finalist, you’ve probably got your eyes fixed firmly on the present just now, and for good reason. But, while, if you’re anything like me, you may not yet have plans for life after university, you probably at least have some vague aspirations. I would venture that one aspiration common to most Oxford students is that one day you would like to own your own home. But, according to a survey published last week, home ownership is an increasingly unrealistic dream for our generation. Thanks to a combination of rising house prices, declining numbers of properties on the market and a reluctance on the part of banks and building societies to lend in the wake of the credit crunch, we are apparently destined to become part of “Generation Rent”.

The figures make for depressing reading. Two thirds of the 8000 20- to 45-year-old non-homeowners interviewed, said they believe they have no prospect of buying a home, even in the medium- to long-term. The average amount a first-time buyer needs to come up with for a deposit has almost trebled in the last decade, from £9,865 in 2000 to £28,770 in 2010, and apparently only 5% are successfully making the kind of spending sacrifices necessary in order to accrue personal savings of that magnitude. Yet more than three quarters of those surveyed still said they aspire to own their own home one day.

Who is to blame for this disparity between dreams and reality? Some members of our parents’ and grandparents’ generations say we have only ourselves to blame. We underestimate the scale of the sacrifices they had to make in order to get onto the property ladder, and we fritter away our cash going out seven nights a week, rather than squirreling it away in preparation for adult life with its various costs and burdens. This seems to be what some readers of The Daily Mail think anyway. And to be fair they probably have a bit of a point. Young people today do spend more and save less than they did back in the actual “Age of Austerity.” How much money could you have saved over the course of your university career if it weren’t for Thursdays at Bridge, Tuesdays at Camera, or any night at The Turf? (Answers on the back of a postcard.)

On the other hand, it is undeniably harder to get into the property market today than it was a generation ago. It’s all very well for the baby boomers to sit in their nice houses and chastise us for our profligacy, but they ultimately are benefiting at our expense from high property prices. First-time buyers today feel that they are priced out of the market principally because the current generation of homeowners has seen the value of their property increase exponentially in recent decades.

The blame game is further complicated by the ongoing controversy surrounding the role of the banks in the British economy. Bankers just don’t seem to be able to get it right. Whatever happens they can be sure they will be criticised, either for lending money too readily as they did in the run up to the financial crash of 2008, or for being too cautious, leaving first-time buyers high and dry.

Meanwhile, some on the political Left are using this as an opportunity to exorcise the demon of Thatcherism by claiming that the root cause of the problem was the introduction of the “right to buy” back in 1980. Over the three decades since the “right to buy” was introduced, more than a million council houses have been sold off, but they have not been replaced.

But is the news that we are to be “Generation Rent” really a cause for concern, or should we be changing our mindset when it comes to home ownership and embracing renting as the way of the future? It seems to work OK on the continent, where renting is much more common, say the optimists. We’d need to reform our tenancy laws to make it easier for tenants to negotiate longer leases with their landlords at more affordable prices, but surely that wouldn’t be so difficult to achieve, if only we could find the political will to do it? The trouble is that nobody is very interested in tenancy rights.

As a nation, we seem to be conditioned to view renting as inferior to buying. Since at least the 1950s, politicians and journalists have talked about Britain as a “property-owning democracy” and a “home-centred society.” A house remains the ultimate status symbol, and those who don’t own the roof over their head by the time they reach middle age have to cope with their friends that do seeing them as either abnormal or a failure. We also regard owning a home as important because it is seen as a pre-requisite for starting a family. And once a house or flat has become the family home, a strong emotional attachment is usually formed between the family members and the bricks and mortar around them.

Our predilection for buying rather than renting is not just the result of snobbery and a conservative attitude regarding what constitutes the proper environment in which to raise a family though. There are good practical and financial reasons for preferring paying for a mortgage over paying rent. Home ownership is ultimately good for both the individual and the state, because in the long term it saves both money. At the moment the majority of pensioners in this country own the home they live in. If this ever stopped being the case, the existing pension system would become grossly inadequate and the shortfall would have to be made up either by families or from the public purse. Either way, the financial burden would be crippling.

So what is the solution? Getting the banks to free up credit doesn’t seem like a great idea, given that doing so has been the cause of four housing bubbles in the last 40 years, each of which has in time burst and wreaked havoc across the whole economy. What about building more houses to drive down property prices? This might work, though there would obviously be an environmental cost involved, and there would be controversy about how much of the building should be done by the public sector and how much by the private.

According to The Daily Telegraph’s Daniel Knowles, all government has to do is get rid of restrictive planning regulation, and new houses would “spring up like wild flowers.” But our elected representatives will not countenance such a move whilst they continue to pander to the baby boomers who have a vested interest in keeping property prices high.

So it’s time for us to make our voices heard. I for one do not want to be a member of “Generation Rent.” This is the issue that our generation should be taking to the streets about, because frankly, tuition fees are small change in comparison to the way we are all going to be screwed over by the property market in the next few years unless something is done now.

Richard Roberts