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Good afternoon and welcome to this week’s Home Front. The last of 2024. In recent weeks, much has been made of unemployment data. Particularly the fact that large numbers of young adults are neither in work nor actively seeking work.
But little has been about how much of this is to do with the fact that work no longer pays huge numbers of people enough to be able to comfortably afford their rent, let alone contemplate buying a home of their own.
At first glance, the data on who is and is not working appears to present a stark and clear problem.
According to official figures released shortly before Christmas, economic inactivity – the number of individuals not working or looking for a job – is at a near-record 9.3 million people levels, according to the Office for National Statistics (ONS).
Being “economically inactive” is different to being “unemployed”. The latter means you are looking for work and the former means you are not working and not in a position to start work imminently.
Digging into this data quickly reveals that there are many reasons why so many people are not working. These reasons vary depending on age.
For the over-50s, the main reasons that 3.5 million people are not working or looking for work are illness or early retirement.
Of those aged between 25 and 49, 1.1 million people have said they are not working because they have caring responsibilities. Almost a million of the individuals in this group are women. Another 981,000 people reported sickness as the reason for their economic inactivity.
When it comes to under-25s, the data gives further cause for concern.
Around 2.7 million people aged between 16 and 25 were economically inactive in 2023. While most people (2,149, 500) in this group are students, almost a quarter of a million (234, 600) said they were long-term sick. It’s thought that poor mental health is a major reason for this.
And, crucially, regardless of the reason for their economic inactivity, the vast majority of the 2.7 million said they did not want a job.
This might sound shocking but is it any surprise?
Work, if you are lucky, is a vocation. Something you enjoy. But, for many people, it is a way of earning enough money to cover the essentials – food and shelter.
Increasingly, for younger adults, work does not pay enough to do that. And, if going to work won’t help you pay your way, let alone progress your life by buying a home of your own, why would you be inspired to seek it out?
Studies show that aspiration has an impact on people’s mental health. Indeed, in particular, mental health problems amongst young people are thought to have increased in recent years at the same time as competition for jobs has increased while the likelihood of buying a home and attaining economic security for those without family wealth has reduced.
The generational gap
In the 70s and 80s, home ownership became a symbol of social mobility for the baby boomers and Generation X. It was a carrot that encouraged young people to work.
Today, private rents continue to soar above inflation making it hard for young adults to move out of home, let alone save for a deposit.
House prices have soared far faster than salaries in recent decades. According to the ONS, in 2023, just 7 per cent of local authority areas in England and Wales had homes selling for less than 5 times local workers’ average earnings. In 1997, 88 per cent of areas had this ratio.
Given that most mortgage lenders will only offer a loan up to five times a household’s salary, this means that it is far harder to buy a home for young adults today than it used to be.
According to the Institute for Fiscal Studies (IFS) increasing house prices benefited older generations at the expense of younger ones, increasing intergenerational inequality along the way.
The attitudes of young adults today tells an important story which those in Whitehall should listen to carefully.
Rachelle Earwaker, a senior economist at the independent think-tank the Joseph Rowntree Foundation (JRF), told me that these figures have emerged “at a time when prices have been rising and the cost of living has been swarming our lives as well.”
For young adults, she worries that “work is not necessarily paying for housing, everything is really expensive and student debt is rising” for those who go to university.
Studies show that unless you have wealthy family members who can help you with a deposit, you’re less likely to become a homeowner. A recent study in Denmark, believed to be one of the largest of its type and involving 630,000 children and their parents, found the largest factor in people’s ability to acquire financial assets through their lifetime is how wealthy their parents are.
Similar inequalities are prevalent in the UK housing market and this, Ms Earwaker says, is reducing young adults’ options.
There has been a “substantial fall” in home ownership among young adults since 1997. The IFS has said 35 per cent of 25- to 34-year-olds in 2017 were homeowners, a decrease from 55 per cent in 1997. The IFS also note that the biggest fall had been seen among middle-income young adults. For those on low incomes, home ownership is a pipe dream.
The JRF’s research has established that a minimum income standard (MIS) is required for people to have an acceptable standard of living. For a single person, it’s £28,000 a year after tax. For a couple with two children, it’s £69,400.
Across the country, the median salary for people in their 20s falls short of this.
“It’s not surprising that things are looking and feeling really tough for young people,” Earwaker said. “A lot of questions should be asked about these [economic inactivity] figures. If you’re not earning the MIS then work isn’t paying enough. We need to ask whether work is working for people who are struggling – with mental or physical health or with family commitments.”
Economic instability
Most young adults know they will be unlikely to become homeowners on their own. Even those in reasonably well-paid jobs are feeling the pinch in that respect.
With nothing to aim for, work becomes less appealing.
Economic instability also begets anxiety. Young people are more likely to rent their homes. Studies show that renters suffer with higher rates of anxiety than homeowners. That, in turn, can make it harder to work.
Until the Government gets a grip on housing affordability for younger generations in Britain and finds a way to deliver cheap, secure homes for the workers of the future, a vicious and miserable cycle in which having a job barely seems worth the hassle will only deepen.
2025 is going to be an interesting year for house prices. It’s widely predicted that they will continue to rise across the country. However, because mortgage rates are unlikely to fall dramatically, this will make buying a home less and less affordable.
In its latest analysis, the Office for National Statistics said house prices went up by 3.4 per cent in the 12 months leading up to to October 2024. However, this is still a provisional estimate.
On Boxing Day, the property listings website Rightmove says the number of homes listed for sale was 26 per cent higher than last year. This post-Christmas jump is not abnormal, people tend to wait until the festive period is over before uprooting their lives. However, the rise in the number of homes being sold suggests that the number of people looking to move is going up.
But, with stamp duty changes on the horizon how many of those listings actually translate into sales remains to be seen.
Ask me anything
This week’s question comes from a reader who is concerned about a neighbour with substance abuse issues who has been targeting them with anti-social behaviour. Recently, this has included shouting abuse into their video security system and turning off their water supply.
The difficult neighbour is a social tenant while the concerned reader is a leasehold homeowner in the same building.
They want to know what their rights are?
This is a very difficult situation. It involves someone in the care of the council who has complex needs. However, that does not take away from how distressing any of their behaviours are to the homeowner being targeted.
Sadly, the only option for this reader is to report their neighbour to the council. That could result in an eviction.
Both the Housing Act 1985 and the Housing Act 1988 set out grounds for eviction relating to nuisance to neighbours as well as illegal use of property, which can include drug taking.
The Protection from Harassment Act 1997 also states that ‘a person must not pursue a course of conduct which amounts to harassment of another person, and which s/he knows (or ought to know) amounts to harassment’.
So, the reader could also notify the police.
It’s a horrendous situation for anyone to find themselves in. The council responsible ought to offer support to their tenant and find alternative accommodation. However, as I know all too well, this doesn’t always happen.
Vicky’s pick
Over the break, I went to see Conclave. I wasn’t convinced that a story about papal elections would grip me given that I am a) agnostic and b) not well-versed in Catholicism. I was wrong.
This plot-heavy emotional dramatic thriller was less about religion and more about humanity. It completely captured my imagination as it took on complex conversations about race, gender and LGBTQ+ issues in ways that were sometimes subtle but always profound.
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