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26 March 2022

Why boomers tell millennials that there isn’t a housing crisis

When the house prices you’ve grown used to are twice or three times £300,000, it’s easy to start seeing the latter as reasonable. It isn't.

By Jonn Elledge

There’s a concept in behavioural economics called “anchoring”. If we’re told, without context, that the price of a cup of tea is £3, we may find ourselves spluttering about it just being a bag and some water and muttering to our companions that perhaps we should try elsewhere. If the same cup features on a menu in which all the coffees cost £4 and up, though, that tea quickly comes to look reasonable. In other words, our perception of a number can be affected by any other numbers that happen to by lying around.

All of which came to mind the other day when someone tried to convince me that there was no housing crisis in Oxford. According to data from the policy researchers Centre for Cities, Oxford has the least affordable housing of any major settlement in the UK, with average house prices running at an absurd 15.3 times average wages. (In London, it’s a mere 14; nowhere is less than 5.5.)

But, this guy pointed out, there are still three-bed family homes in Blackbird Leys on offer for a mere £375,000. Seen through the prism of house prices elsewhere in the city, where a three-bed can be £600,000 and up, this momentarily seems like quite good value. It isn’t: you’d need a household income of around £75,000, and around half that in ready cash, merely to be able to buy a family home in an area about which Google suggests you may wish to ask, “How rough is Blackbird Leys?” If the cheapest areas of the city still require an income that’d put you in the top 2 per cent of households nationwide, it’s hard to avoid the conclusion that, just maybe, there’s a problem. 

You can play this game with any city with a decent economy and come to a similar result. The average price of a flat in Bristol, according to RightMove, is £271,000. That means that, to buy it from a standing start you’d need a deposit of at least £27,000 and a household income of £54,000. The average income in Bristol is around £27,000. Still want housing security but find that you’re unlucky in love? Tough. 

Northern cities are cheaper, but not by enough to actually count as cheap. The average house price in Manchester over the last year was £249,000; in Liverpool, £201,000. Think for a moment about what it would take to afford that on your own as a first-time buyer.

It’s not even worth running the numbers on most London boroughs, but let’s consider the cheapest. In Barking & Dagenham, the average property price is now above £300,000; as of 2019, GMB reported that the median hourly wage for those in full time employment was £14.28, an annual salary of around £27,000. Even in the cheapest bit of the capital the average full-time worker cannot afford the average property. Not everybody is a full-time worker. 

And yet, it’s very easy to see the number £300,000 next to the words “property in London” and think, “Ooh, that’s cheap.” It isn’t. It’s a fortune, and to afford it an individual would have to be earning a wage that is, by national standards, huge. But when the prices you’ve grown used to are twice or three times that, it’s easy to start seeing it as reasonable.

Anchoring, I think, is one reason why many people who are lucky enough to have sorted out their housing situation some time ago have been able to convince themselves that there isn’t a housing crisis in this country. They look at the price of starter flats and compare it to the value of their own home, or compare the price of housing in London to that of almost anywhere else, and conclude that the kids are just whining again. 

They’re not. In a country with an under-regulated private rental sector and a huge waiting list for social housing, the only way of attaining housing security — a fairly basic requirement, if you want to start a family — is to own your own home. Doing that has become much, much harder. 

A depressing graphic the Office for National Statistics released this week to accompany its latest affordability statistics makes the point. Back in 1997 only a handful of local authorities, mostly plusher bits of London, had average house prices that were more than six times average earnings. By 2021, though, in the average part of England and Wales, house prices were running at nine times annual earnings.

There is a reason why the under-40s spend so much of their time complaining about house prices. It’s because they’re far, far too expensive.

On the other hand, if they insist on paying £4 for a frothy coffee and blowing £3,500 a throw on avocado toast, then perhaps they deserve everything they get. 

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