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Securing a place to call oneself is a key mark of independence, and a step towards creating a family. However, for many young people in many countries the house cannot be converted and the rent is not safe, expensive or both, especially in places where the good jobs they want are plentiful.
Those who bought the house a long time ago have also benefited from tax-free valuation, an implicit tax-free rental income and, in the case of the UK, capital gains tax. In the meantime, if they don’t have the support of the “mother and father’s bank” or if they don’t pay very well, many of the younger generations “generation income”.
It is one of the differences between the generations that is hurting today’s high-income society. Others include job insecurity, mountains of student indebtedness, insecure pensions, inequalities in public spending and, most importantly, climate change. The Financial Times believes it is time for politicians to offer a new deal to young people, as the economic outlook has taken more blows during the pandemic. This week’s series of editorials will look at housing, pensions, jobs, education, the climate and taxes, and how they can be reformed to help the younger generation.
When the FT surveyed young people, respondents from Hong Kong to Shanghai and London said housing costs were one of their biggest concerns. To take the UK as a case study, it has become home buying an expensive exception by historical standards in relation to profits, especially in London. Proportion of people aged 35 to 44 in England on private rentals it jumped from 9 percent to 28 percent Between 1997 and 2017.
The average number of homes per year was 325,000 between 1950 and 1970, both inclusive, and it rose to just over 180,000 between 1990 and 2019. There has also been a sharp decline in the supply of social housing. A large portion of the stock was sold under the “right to purchase” while the new building collapsed dramatically. In February 2017, then Prime Minister Theresa May he warned that “breaking our housing market is one of the biggest obstacles to progress in Britain today”. He could speak in many other countries.
High house prices are partly due to the real long-term decline in interest rates. But the solution cannot be to artificially raise interest rates to create a collapse in house prices without taking into account the costs of unemployment and production.
FT series: A New Deal for the Young
What would improve the economy for today’s youth? FT writers are committed to policies that would change housing, pensions, jobs, education and the environment for younger generations in a series of opinion articles from 26 to 30 April.
Come join us for a lively discussion this week, every day at 14:00 BST, and share your ideas and questions. Register for free
Property taxes are inconsistent, especially in the UK: the regressive municipal tax burden is proportionally much higher than that of owners of cheaper property. In addition, no assessments have been updated in England since 1991. The reform is urgent: it should be a tax proportional to the value of property, regularly updated valuations and the capitalization of the tax on elderly residents, it should be a balance paid from wealth.
However, the most crucial problem is the inadequate growth in supply, including affordable housing. To address this, governments, especially local authorities, must be able to acquire land with the value specified in existing planning permits.
Local authorities should also benefit from the increase in value resulting from changes in these permits. This would provide an incentive to promote development by benefiting existing residents.
Taxing the value of land is a stronger general case than buildings. But this will be a particularly important incentive in the case of land with unused planning permits. Nothing can drive development with greater force than this tax.
An important part of the new financial resources available to local authorities should also be used to build affordable housing for people who will pay less. Large conurbations, in particular, cannot function without such staff.
Eventually, the private rental sector will continue to be an important form of mandate. But long-term tenants need more security: standard leases should be extended to three years.
Housing is a complex problem with many branches. But in many countries, especially the UK, having a higher supply is essential, especially in the most dynamic economic conurbations. This will take some radical policy changes. It’s time to embrace them.
Join a live discussion of the housing crisis with FT writers on Monday, April 26 at 2 p.m. Register here for a free ticket.
Other editorials and pieces from this series can be found here ft.com/newdeal
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