Under-35s in the UK face becoming permanent renters, warns thinktank

Same problem in Australia. Just to define some terms for non-Australian folk:<p>- Negative gearing: A deduction received on net rental income losses (e.g. I&#x27;m a landlord who pays $100 in loan interest, receives $60 in rent, so I claim a tax deduction of $40)<p>- Capital gains: I buy a house worth $100,000. A few years later I sell it for $260,000. I&#x27;ve made a capital gain of $160,000.<p>The under 30s age group receive:<p>- 1% of total negative gearing tax benefits, whereas the 50+ age group receive 55% (<a href="http:&#x2F;&#x2F;www.macrobusiness.com.au&#x2F;wp-content&#x2F;uploads&#x2F;2016&#x2F;02&#x2F;ScreenHunter_11535-Feb.-16-08.09.jpg" rel="nofollow">http:&#x2F;&#x2F;www.macrobusiness.com.au&#x2F;wp-content&#x2F;uploads&#x2F;2016&#x2F;02&#x2F;S...</a>)<p>- 2% of capital gains tax benefits, whereas the 50+ age group receives 76% (<a href="http:&#x2F;&#x2F;www.macrobusiness.com.au&#x2F;wp-content&#x2F;uploads&#x2F;2016&#x2F;02&#x2F;ScreenHunter_11536-Feb.-16-08.10.jpg" rel="nofollow">http:&#x2F;&#x2F;www.macrobusiness.com.au&#x2F;wp-content&#x2F;uploads&#x2F;2016&#x2F;02&#x2F;S...</a>)<p>It&#x27;s inter-generational theft perpetrated by the baby-boomers, aided and abetted by tax policy. These tax breaks also cause of financial system instability and capital mis-allocation. The tax breaks are regressive: the top 30% highest income households receive 62.2% of total negative gearing tax breaks (<a href="http:&#x2F;&#x2F;www.macrobusiness.com.au&#x2F;wp-content&#x2F;uploads&#x2F;2015&#x2F;04&#x2F;ScreenHunter_7244-Apr.-28-13.45.jpg" rel="nofollow">http:&#x2F;&#x2F;www.macrobusiness.com.au&#x2F;wp-content&#x2F;uploads&#x2F;2015&#x2F;04&#x2F;S...</a>).<p>Personally, I think the main issue is that the distortionary effect of untaxed land rents are greatly amplified by capital gains tax exemptions. That, and housing market supply inelasticities due to restrictive zoning laws, property transaction taxes (i.e. stamp duty), drip fed land releases by local governments etc.<p>Eat the young!

The problem faced by the UK, and many other countries, is not that people are renters, it&#x27;s that they have diminishing financial security. Swiss people rent more than any other people in Europe (only 35% homeownership rate) but they are relatively more affluent and being a renter does not impair their ability to save and accumulate assets. Spanish people own their home in a large proportion and I&#x27;m sure Swiss people wouldn&#x27;t trade with them.<p>Let&#x27;s not conflate the means with the end. The goal is to make people financially secure, homeownership can be a mean to that but it&#x27;s far from automatic. In fact homeownership can be a consequence of financial security.<p>Your home is an incredibly illiquid asset, and you are likely to need to liquidate it at the worst time.

This same pattern plays out in most places that&#x27;re desirable to live. People want to move somewhere, demand for housing goes up, and prices rise because those people compete against each other for the existing housing stock. Ordinarily, this would be addressed by new construction: build enough housing units to meet the demand, and prices will be reasonable.<p>But construction is controlled by local governments through zoning law, and local governments are controlled by incumbent landlords who <i>want</i> the prices to skyrocket to unreasonable levels. So young people end up paying huge amounts of money to established landlords, while landlords distort the narrative to blame the problem on anything and everything except the lack of construction.

The UK is bringing in a second home tax:<p><a href="http:&#x2F;&#x2F;uk.reuters.com&#x2F;article&#x2F;uk-britain-budget-housing-idUKKBN0TE1OZ20151125" rel="nofollow">http:&#x2F;&#x2F;uk.reuters.com&#x2F;article&#x2F;uk-britain-budget-housing-idUK...</a><p><a href="http:&#x2F;&#x2F;www.bbc.co.uk&#x2F;news&#x2F;uk-scotland-scotland-politics-35113952" rel="nofollow">http:&#x2F;&#x2F;www.bbc.co.uk&#x2F;news&#x2F;uk-scotland-scotland-politics-3511...</a><p>In the town where I live there are a lot of summer homes that are unoccupied in winter. In London, there are obviously a lot of homes that the rich use when they are visiting. This is an extravagance that is affecting the UK as a whole and a second home tax might help a little. I don&#x27;t think that the above measures go anywhere near far enough though.

Grace Dent writes for the Independent how &quot;for the average person, marrying into property will be your best shot at &#x27;owning it&#x27;&quot;<p><a href="http:&#x2F;&#x2F;www.independent.co.uk&#x2F;voices&#x2F;the-housing-crisis-is-creating-sharp-elbowed-husband-hunters-a6875576.html" rel="nofollow">http:&#x2F;&#x2F;www.independent.co.uk&#x2F;voices&#x2F;the-housing-crisis-is-cr...</a><p>Crazy.<p>But to be honest, why is everyone focused on <i>buying</i> a house? Does everyone want to own a house, 1.7 kids and a car or where does the <i>need</i> to buy instead of renting come from? Maybe I&#x27;m missing something, but the flexibility of renting seems a lot bigger advantage than the small advantages of owning a house.

Is this the New Feudalism? The super wealthy buying property from all over the world literally for rent seeking? Will the world become a Company Town?<p>Is this desirable? Inevitable?

Is there anything wrong with that? I lived in Italy for around 2 years and everyone there seemed perfectly happy with renting.<p>According to this article from The Guardian, it would appear to be similar in France.<p><a href="http:&#x2F;&#x2F;www.theguardian.com&#x2F;money&#x2F;2016&#x2F;jan&#x2F;14&#x2F;why-are-brits-so-obsessed-with-buying-their-own-homes" rel="nofollow">http:&#x2F;&#x2F;www.theguardian.com&#x2F;money&#x2F;2016&#x2F;jan&#x2F;14&#x2F;why-are-brits-s...</a>

Firstly there seems an inherent bias that young people want to be homeowners and not being a homeowner is bad for people. My first reaction to &quot;Under-35s in the UK face becoming permanent renters, warns thinktank&quot; is, &quot;So what?&quot;. We are not talking about people being homeless.<p>Also I think lots of these reports never make any mention of demographic changes over time. The 35 year old of 1998 is likely to be a very different person to the 35 years of 2026.<p>In the 18 years since 1998 we have seen university attendance increase from 25% to 33%. We have seen the cost of university education increase, so most graduates now carry more debt. I suspect we&#x27;ve seen an increase in the average age of marriage. Probably also a reduction in marriage and number of people that are having children by 35.

When I graduated from college you&#x27;d see exactly this sort of article in the paper every so often. And indeed, at the time the 20% <i>downpayment</i> for a house was going up faster than I could save money. And then the housing market collapsed and I bought a house.<p>Over long periods of time housing only goes up about as fast as inflation. Younger people in the UK are not facing &quot;becoming permanent renters&quot;. They&#x27;re just facing a bubble, for the time being, that will produce lots of bargain prices when it pops.

Well forget ever buying in London, my rent alone in central London is £2656 ($3800) a month. This flat would be more than £565,000 to buy.<p>How anyone saves for a deposit, while paying rent - without help from their parents is beyond me.

I feel like I&#x27;m burning money renting in London right now. I tried renting somewhere really cheap to save money for a deposit but it made me miserable. Now I spend a lot more and only have to share with one person but I can&#x27;t save.

Don&#x27;t want to rub salt of people&#x27;s wounds here, but remember when you guys screamed on the top of your voices that real estate was a bad instrument. This is basically what happens when you follow that line of thinking, when your demands start popping up later in life you realize you could have easily made those investments a few years back, but you didn&#x27;t. And may be even watch people who made far lesser than you in salary having better house than you.<p>May be if these under-35&#x27;s had saved some money instead of blowing it all on &quot;enjoying their lives&quot;, &quot;travelling the world&quot; and on those new iPhone models every year they would have a decent sum for a downpayment somewhere in the out skirts.<p>Also note that most landlords themselves probably went through hell to build themselves this portfolio for their rainy days.<p>If you think you can&#x27;t buy yourself a home, you need to drastically rethink your priorities. Because like it or not, anytime is the best time for these things. Its about timing, location and money. Earlier you buy, the better place and lesser price you get to buy. For the perspective of the next decade now is the right time.<p>You an tax the rich as much as you won&#x27;t, no matter anywhere in the world. Most of these people will never come to own a home. The true reason why these people can&#x27;t afford a home is not because its expensive, but because they refuse to commit themselves to any kind of a long struggle, that doesn&#x27;t interfere with the privileges they think they are entitled too.

Hmmm... biggest shortage of housing is in the London area, I guess?<p>This is due to people parking their funds in real estate because interest rates <i>anywhere</i> in the stock market are basically zero when compared to real estate, and because transferring ownership of an estate holding company is a pretty nice way to launder&#x2F;transfer money.<p>I&#x27;d propose a law that makes it illegal for an estate owner in housing-crisis areas to leave a home un-occupied for over 4 months a year; if this is not the case the state is allowed to choose an arbitrary person and let him rent the apartment at a rate similar to the non-luxury-housing market.<p>In Germany, in some areas this law is already in effect (e.g. <a href="http:&#x2F;&#x2F;www.hamburg.de&#x2F;contentblob&#x2F;3999156&#x2F;data&#x2F;hamburgisches-wohnraumfoerderungsgesetz.pdf" rel="nofollow">http:&#x2F;&#x2F;www.hamburg.de&#x2F;contentblob&#x2F;3999156&#x2F;data&#x2F;hamburgisches...</a>). The legal foundation for these laws is in the Grundgesetz: &quot;Eigentum verpflichtet. Sein Gebrauch soll zugleich dem Wohle der Allgemeinheit dienen.&quot;, which basically means that if you have the privilege of owning something, you have to contribute to common wealth with it.

Well one issue that has been pointed out by people who work in this area is the program Help to Buy. Many have claimed that this artificially raised prices of homes because of the guarantees and money built in the system.<p>The solution as with Vancouver is to ease the cost of building new homes and possibly using targeted property tax relief of those you are seeking to encourage into home ownership.<p>One other issue is apparently you can actually get a discount on taxation on your other homes if they are furnished because there seems to be some relation to the number of days it is occupied; unless I am just reading that wrong. If so this one area that needs adjusting, reducing tax because you don&#x27;t actually spend time in the home but it otherwise is unavailable to others should not incur a benefit and if anything encourages buying up second and third homes

Perhaps true of fashionable London, but hey, that&#x27;s supply and demand. Tax the Russians and Chinese more, and those addresses would come down in price.

I may get downvoted into oblivion, but i will still voice it out.<p>I read the US exported their Inflation of QE to other countries. And then gets the Chinese to spend buying property all around the world.<p>Most government are reluctant to act due to worry of popping another housing market like US 2008.<p>But it is good finally some* are taking notice, given we have 3 HN article the same week on property pricing. But it is likely too late. Those who are now 25 may have some hope to have some things sorted in their prime years. Those who are in their 30s like me will likely have to battle hard just for survival.<p>For those who don&#x27;t know where this is going, take a look at Vancouver, Sydney, London, or a place call Hong Kong where many people could only afford to live in 10m2 &quot;flat&quot;.<p>I maintain that unless there is social housing program in place to guarantee every citizen a place for basic living, housing should NOT be an investment options or should at least be heavily taxed &#x2F; regulated.

Here&#x27;s an oldie but a goodie that I refer people to on this topic <a href="http:&#x2F;&#x2F;assayviaessay.blogspot.com&#x2F;2014&#x2F;04&#x2F;rent-or-buy.html" rel="nofollow">http:&#x2F;&#x2F;assayviaessay.blogspot.com&#x2F;2014&#x2F;04&#x2F;rent-or-buy.html</a>

In certain parts of the UK people are rejecting the norm and opting to live in boats, caravans, yurts and the like. Many of these people live outside the standard economy and work on a semi-barter system, trading skills, and some are artists who are working with modern systems like Etsy and the internet at large to sell their wares. I think that this is going to become increasingly common over time but it does tend to be younger people doing this; it begs the question of what these people are going to do in their old age when their lifestyle choices means that their savings (and pension contributions) are minimal.

Thank god I am 48.

Phew. Wait! I&#x27;m still renting a flat.

Hey dang, if this post doesn&#x27;t get flagged already, perhaps change the link to the original Telegraph article (<a href="http:&#x2F;&#x2F;www.telegraph.co.uk&#x2F;finance&#x2F;property&#x2F;news&#x2F;12155466&#x2F;Only-the-rich-and-elderly-will-own-homes-within-a-decade-thinktank-warns.html" rel="nofollow">http:&#x2F;&#x2F;www.telegraph.co.uk&#x2F;finance&#x2F;property&#x2F;news&#x2F;12155466&#x2F;On...</a>) instead of the vice news aggregation page.

Progressive tax on how much estate you own could help by incentivising some owners to sell their houses the can&#x27;t or don&#x27;t rent.<p>Of course that would cause estate value to drop which is something apparently nobody wants except for poor people (99%).