“In a globalised era, a welfare system that relies on home ownership is critically vulnerable”

Yay? Image: Getty.

The inequalities and inequities that housing markets generate have become a cross-national issue in the last decade or so. In Australia, the UK and the US, discussions of “Generation Rent” have taken centre stage.

In the generational debate, older, asset-wealthy owner-occupiers advantaged by previously more stable lending conditions and historic house price trends have been pitted against younger cohorts. The latter have been priced out of the home buyers’ market and pushed into rental housing in ostensible perpetuity.

Evidence of just what “Generation Rent” is and, more importantly, why it matters have, however, been somewhat fuzzier.

Economies and security built on housing

One reason declining access to home ownership for younger people is of such concern is that housing is much more than housing. The wealth accumulated in our homes over our lifetimes has come to represent economic security and a means to live more comfortably in old age. It’s seen as a buffer in times of hardship – buying a home is an implicit part of the welfare system in many contexts.

Declining home ownership is contributing to inequality.

Governments have largely nurtured this. They often support or even fund the growth of home ownership and protect property value increases. It has become increasingly evident, however, that this approach to housing markets as a kind of welfare policy has fundamental limitations.

For one thing, the global financial crisis of almost a decade ago demonstrated how deeply rooted and transnational housing finance has become. A welfare system that relies on home ownership in a globalised era is thus critically vulnerable.

Although property markets work at a local level, global capital has become increasingly intrusive. Investment purchases are financed from around the world. While our homes function as our family savings accounts, housing now also serves as safety deposit boxes for transnational middle classes and wealthy elites.

The global financial crisis also illustrated that the very conditions that may require home owners to draw on their property assets as an economic buffer are likely to undermine their value and make them difficult to access when needed.

Since the crisis, housing has again become an overwhelming focus of investment, sustained by quantitative easing, weaker financial markets, and low interest rates. This is driving renewed inflation in house prices, especially in global cities, with overflows downwards and outwards.


Divide grows between owners and renters

Buying a home is now well beyond the capacity of many among the increasingly vulnerable cohorts of younger people. They have also faced reduced job security, subdued wage rises, and diminishing access to credit.

As a result, home ownership rates across English-speaking societies, but also elsewhere, have fallen significantly, driven by the collapse in home buying among millennials.

While it is easy to blame globalisation (especially foreign investors) and dwell on the historic advantages baby boomers enjoyed, much of the problem lies with our housing systems and especially with our approaches to fixing them. Critically, by relying on home ownership and making homes default savings accounts essential to our long-term welfare security (in the context of austerity or welfare state retrenchment), we have come to depend on them for much more than housing.

This is why Generation Rent represents so much of a challenge. It requires more than dealing with the supply and distribution of home ownership. It may require a complete rethinking of home ownership as a basis of our housing systems.

The term “Generation Rent” is not particularly useful as it implies direct conflict between cohorts. In fact, the opposite is true. In recent years different generations within families have increasingly mobilised around their collective property wealth in the face of diminishing economic security.

In the UK, around one in ten first-time home-buyers were getting help from parents in the mid-1990s. By 2005 this was up to 25 per cent. And since the GFC the figure has soared to as high as 75%.

The family assets invested in housing are undergoing profound shifts.

At the same time, has been a remarkable shift in family deployment of assets. Numbers of private landlords increased from just over half a million in the early 1990s to around 2.2m by 2015 (equivalent to almost one in ten households). This represents a remarkable boom in new landlords, owning just one or two extra properties, since the beginning of the century.

Various studies suggest that house hoarding and “landlording” have become an extension of the home-ownership welfare strategy. Buying and then renting out an extra home represents an effective means of ensuring long-term security. It’s also something that can be drawn upon to help out, or even pass onto the kids.

Generations, then, are not necessarily at odds with each other. There is little evidence that younger people directly blame their elders for their housing situation. In fact, it is older people that are most likely to help them out.

Problem is deeper than Generation Rent

Underlying Generation Rent is essentially a wider problem derived from the maturation of home-ownership systems in a diverse numbers of contexts, from Ireland to Japan.

In the past, home-ownership rates and property prices boomed, supporting asset accumulation for particular cohorts. However, this created conditions for tighter access, which has undermined the tenure and reinvigorated low-level rent-seeking in the longer term.

The outcome is not so much a polarisation between generations, but between younger people based on the housing market position, or strategy, of their parents, or even grandparents. The children of secure home owners are likely to eventually be helped out or inherit. The children of renters, over-leveraged mortgage-holders or ageing households who rely on their unmortgaged property to meet their own needs are likely to remain locked out unless they have a considerable income.

In the context of continued flows of global capital and the normalisation of property investment as family welfare strategy, we cannot realistically expect that socioeconomic inequalities derived from housing or problems of access among younger people are going to be reversed.

Governments have largely responded to declining home ownership by sponsoring access to credit or providing extra cash for potential home buyers. This has done little other than revive house price inflation and thus aggravate the affordability issue.

Rental housing careers are likely then to become more common and last for longer. We therefore need better means to reconcile tenants’ needs with both housing and welfare practices. This will involve policymakers and politicians imaging other ways of “doing” housing that consider different types of households and life courses, tenures and housing ladders.

Younger people themselves seem to be adapting to a post-homeownership landscape. While owner-occupation remains deeply normalised, household situations have become increasingly diverse. Sharing with friends or strangers has become much more common.

In cities, this shift has started to stimulate private-sector responses, including large-scale purpose-built developments expressly tailored to the needs of Generation Rent.

Richard Ronald is an associate professor at the Centre for Urban Studies, University of Amsterdam

This article was originally published on The Conversation. Read the original article.

 
 
 
 

What's actually in the UK government’s bailout package for Transport for London?

Wood Green Underground station, north London. Image: Getty.

On 14 May, hours before London’s transport authority ran out of money, the British government agreed to a financial rescue package. Many details of that bailout – its size, the fact it was roughly two-thirds cash and one-third loan, many conditions attached – have been known about for weeks. 

But the information was filtered through spokespeople, because the exact terms of the deal had not been published. This was clearly a source of frustration for London’s mayor Sadiq Khan, who stood to take the political heat for some of the ensuing cuts (to free travel for the old or young, say), but had no way of backing up his contention that the British government made him do it.

That changed Tuesday when Transport for London published this month's board papers, which include a copy of the letter in which transport secretary Grant Shapps sets out the exact terms of the bailout deal. You can read the whole thing here, if you’re so minded, but here are the three big things revealed in the new disclosure.

Firstly, there’s some flexibility in the size of the deal. The bailout was reported to be worth £1.6 billion, significantly less than the £1.9 billion that TfL wanted. In his letter, Shapps spells it out: “To the extent that the actual funding shortfall is greater or lesser than £1.6bn then the amount of Extraordinary Grant and TfL borrowing will increase pro rata, up to a maximum of £1.9bn in aggregate or reduce pro rata accordingly”. 

To put that in English, London’s transport network will not be grinding to a halt because the government didn’t believe TfL about how much money it would need. Up to a point, the money will be available without further negotiations.

The second big takeaway from these board papers is that negotiations will be going on anyway. This bail out is meant to keep TfL rolling until 17 October; but because the agency gets around three-quarters of its revenues from fares, and because the pandemic means fares are likely to be depressed for the foreseeable future, it’s not clear what is meant to happen after that. Social distancing, the board papers note, means that the network will only be able to handle 13 to 20% of normal passenger numbers, even when every service is running.


Shapps’ letter doesn’t answer this question, but it does at least give a sense of when an answer may be forthcoming. It promises “an immediate and broad ranging government-led review of TfL’s future financial position and future financial structure”, which will publish detailed recommendations by the end of August. That will take in fares, operating efficiencies, capital expenditure, “the current fiscal devolution arrangements” – basically, everything. 

The third thing we leaned from that letter is that, to the first approximation, every change to London’s transport policy that is now being rushed through was an explicit condition of this deal. Segregated cycle lanes, pavement extensions and road closures? All in there. So are the suspension of free travel for people under 18, or free peak-hours travel for those over 60. So are increases in the level of the congestion charge.

Many of these changes may be unpopular, but we now know they are not being embraced by London’s mayor entirely on their own merit: They’re being pushed by the Department of Transport as a condition of receiving the bailout. No wonder Khan was miffed that the latter hadn’t been published.

Jonn Elledge was founding editor of CityMetric. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites.