By John Cooper | @jc_is_on_the_rails
Generation X, or Gen X, is the demographic cohort following the baby boomers and preceding the Millennials.
In the 1980s, it would have taken a typical UK family three years to save for an average-sized house deposit. Today, it would take around nineteen. This startling statistic can go some way to explaining why the number of families paying private rents is on the rise, not only for twenty and thirty-somethings but the over-forties as well. We’re talking about Generation X, another one of those terms we use to define people born within a twenty-year period.
The problems facing Millennials are well documented, but Generation X hasn’t had the same level of attention. However, their circumstances are becoming more evident now that they are moving into their forties, without home ownership amongst the X’ers rising as hoped, or expected.
It’s useful to note here that there has been a steady trend towards private renting over the last few decades. The full statistics for the proportion of households in rented accommodation, at the age of thirty, can be broken down as follows:
Baby-Boomers (1945-1964): 1 in 10
Generation X (1965-1980): 2 in 10
Millennials (1981-1996): 4 in 10
The number of private rents has been doubling with each generation. Interestingly, this trend seems to be flipping for the under twenty-fours age bracket, because so many are, quite wisely, living at home for longer to save money.
Did you know that half of parents of those aged twenty to thirty-five do not own their own home either, so it looks like the next generation might be learning valuable lessons from the experience of their parents?. Time will tell whether their efforts are in vain.
There are market forces at play here, with the triple whammy of rapid house price growth (pre-financial crisis especially), stricter lending rules, and weakened income growth since the downturn in 2007/8, as well as high rental costs making it more difficult to save. There are potentially severe and long-term consequences of this trend, likely costing the state an extra £3.2bn in social rents by 2060, as the decrease in homeownership begins to have more of an impact on the welfare system.
We are witnessing a particular set of demographic circumstances play out here. The X’ers and millennials spent longer in education than their predecessors. Overall participation in higher education increased from 3.4% in 1950 to 8.4% in 1970, 19.3% in 1990 and 33% in 2000, meaning the later generations will have spent less time in the workplace, and had less chance to save, by their early 40’s. Also, the younger generation is waiting longer to have children, a significant consideration for people deciding whether to begin the process of buying their own home. However, saying this, the number of households with children renting has tripled in the last thirteen years, suggesting many parents who would hope to buy are not able to do so.
Rising house prices, stagnant wages and a lack of social housing are all combining to reduce the opportunities for people to buy their own home. The difficulties are widely acknowledged. If the proportion of renters increases, or continues at the same level, legislating to make renting a fairer and more secure option will need to be passed to keep pace with societal change. If we aren’t going to introduce more comprehensive measures to help people get on the property ladder, then renting should be made a more viable alternative.
We could start by making tenancies more secure, and a better long-term option. Much of Europe is way ahead of us on making renting desirable, and the UK has one of the highest housing cost to income ratios in the union only exacerbates the problem. The shorthold tenancy act of 1988 reversed many tenants rights in the UK and made it much easier for landlords to evict. We could solve this problem, and the unchecked rise in rental prices could also be calmed, by linking rents to inflation for a period, with a re-negotiation once that period passes. Giving the reassurance of a longer tenancy and the knowledge that the cost of rent will not suddenly be increased. Also, we simply need more housing, including social housing, to reduce demand and bring prices down.
There is no overnight fix for the housing problem. No one size fits all solution. However, without a serious attempt at change, the trend of housing uncertainty facing so many young people will continue to haunt them into their later life.