Why does it matter? We argue that increasing housing costs matter because they: • undermine inter-generational fairness • increase the tax bill through housing related welfare costs • act as a brake on growth • reduce the impact derived from infrastructure investment.
Inter-generational fairness As we discussed in chapter two, high housing costs undermine inter-generational fairness because they impact disproportionately on the young — specifically on those who were not in home ownership before the turn of the millennium. Home ownership is becoming increasingly unevenly distributed across generations, leading to multiple demand side policies, such as the Help to Buy
scheme and more recently, increasing stamp duty relief to properties up to £300,000 for firsttime buyers. Homeownership among 16 to 34 year olds has fallen from 52% just over a decade ago to just 41% in 2019-20.58 These trends are central to the sense of economic disadvantage many young people experience today in the UK. With ‘generation rent’ now spending on average twice as much of their income on housing costs as their parents generation did in their youth59, the housing system needs a thorough review to address affordability. In his 2011 book60, David Willetts argued that the baby boom of 1945-65 produced the biggest, richest generation that Britain has ever known. He argues that baby boomers now run our country and have fashioned the world around them in a way that meets all of their housing, healthcare and financial needs.
Figure 8 Public benefit expenditure on housing (England) 30,000
Investment £000
25,000 20,000 15,000 10,000 5,000 0
7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 -9 -9 -9 -0 -0 -0 -0 -0 -0 -0 -0 -0 -0 -1 -1 -1 -1 -1 -1 -1 -1 -1 -1 96 997 998 999 000 001 002 003 004 005 006 007 008 009 010 2011 012 013 014 015 016 017 018 9 2 2 2 2 2 2 2 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2
Capital Investment (grant)
Housing Benefit
Source: MHCLG data tables MHCLG. (2018). English Housing Survey. Section 1 Household Tables. Annex Table 1.4. Ministry for Housing, Communities and Local Government. [DATE ACCESSED: 4th June 2020] Url: https://www.gov.uk/government/statistics/english-housing-survey-2018-to-2019-headline-report.
58
Resolution Foundation. (2017). Home Affront: Housing across the generations. Resolution Foundation: Intergenerational Commission. [DATE ACCESSED: 8th June 2020] Url: http://www.resolutionfoundation.org/app/uploads/2017/09/Home-Affront.pdf
59
D. Willets. (2011). The Pinch: How the Baby Boomers Took Their Children’s Future - And Why They Should Give it Back. Atlantic Books.
60
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