The Daily Mail compares and contrasts two similar families, both with a gross income of £50,000 in three-bed houses, the only difference being that one family lives Up North in a house 'worth' £200,000 and the other lives Down South in one 'worth' £600,000.
We aren't told how long ago they bought their houses or how much their outstanding mortgages are - the only clue is that the family Up North only spends ten per cent of their income on mortgage repayments and the family Down South spends forty per cent, so the family Up North lives in the lap of luxury and the one Down South has had to cut back on essentials (like gym membership and Jocasta's pony).
But isn't this story played out on every single street in the whole country? Older Baby Boomers have no mortgage at all (unless they were suckered into 'equity withdrawal'); the average bloke in his mid-to-late forties who bought ten or fifteen years ago will have paid his mortgage down to (say) £40,000 but the recent purchaser next door is saddled with a mortgage of (say) £160,000?
So even if all three earn similar wages, and even though all three live in more or less identical houses, the former groups will be living in relative comfort and the young guy will be struggling.
Just sayin'.
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22 comments:
So the guy down south gets another job oop north and lives happily ever after, biting t'heads off whippets.
Or decides to stay put and make do.
Nothing to see here, move along please. And excellent point on the same thing being repeated street by street with different age groups.
Oh, be still my bleeding heart.
FT, ta.
VFTS, in the instant case, yes, big deal. But how would you feel about house prices and NIMBYism if you were in your twenties?
The guy next door to me built his family house when he was still a young man. I spent decades working at dull jobs to pay for mine. He knew what he was doing - I didn't.
£50,000, all I can say is that they must be Local government officials.
Nobody in a "real" joib gets that much moolah, well not in my back garden.
Mark,
A good point, but. In my early twenties I moved to a cheap region and lived frugally for a couple of years. Then did it again about 15 years later when my ex-wife skinned me. 'Tween times and since, I lived reasonably well. I adjusted to what I could afford, didn't make a song and dance about it, it was no big deal. But 'status' never bothered me once I grew up, I don't give a monkey's.
AKH, it's a question of timing is all, knowing about economics is far more important than knowing about DIY and construction and stuff.
Anon, probably.
VFTS, Her Indoors (and thus by default me as well) is a complete house snob. But we are old and lucky and can afford it; if we were leaving Uni today we'd be f-ed.
So what? Many of the people now sitting back and enjoying a mortgage free lifestyle had to start out in exactly the same way as the recent purchaser with the £160,000 mortgage.
Comparing house prices is only a part of the issue. You need to compare overall purchasing costs which include interest rates, then look at that as a proportion of household and disposable income. Go back to the 70s and there was - like today- no such thing as a 100% mortgage. Most building societies expected to see at least 10% deposit plus a history of regular savings deposits with them. Interest rates in the 70s topped 10%. Many of todays supposedly have-it-easy baby boomers had to cope with that and make do and mend with everything else to afford it. Cars, telephones, holidays, a house in your preferred convenient area - in your dreams sunshine!
Older houseowners are not all the recipients of the largesse of the 90s with 100% mortgages,low interest rates and houses ready fitted with appliances and carpets.
It would be good if housing were more affordable, I agree, but it gets tiresome to have that same script of 'how hard it is nowadays' regurgitated ad nausiem by people who have no memory beyond the last 20 years and wear rose coloured glasses to look back
If you were to pick pairs of families at random one from up north and one from down south you would see a clear trend for the income of the southern family to be higher than that of the northern. Although large proportions of public sector jobs may counter this trend to an extent. So as you point out it is more pertinent to compare the real-terms mortgage costs of houses on the same street with respect to when they were purchased.
So what? Many of the people now sitting back and enjoying a mortgage free lifestyle had to start out in exactly the same way as the recent purchaser with the £160,000 mortgage.
It very much depends on where they were in their particular boom/bust cycle, but that's not really the point.
While it's tempting to think that surviving being robbed blind in the past entitles you to be the robber now, at some point we'll need to get over that mentality if we're going to have a workable society. To do that, we'll need to acknowledge just how the robbery takes place.
It would be good if housing were more affordable, I agree, but it gets tiresome to have that same script of 'how hard it is nowadays' regurgitated ad nausiem by people who have no memory beyond the last 20 years and wear rose coloured glasses to look back
While there are certainly young'uns who don't even know they're born, there are also a disturbing amount of old'uns who quite simply have their fingers in their ears and their hands over their eyes. Very few people want to even consider the possibility that they're part of the problem.
I agree though, I don't think it's useful to dogmatically define this in terms of generations. At the end of the day, this is not a matter of young vs old.
W42, sure, my parents (for example) bought their nice semi in the mid-1960s for £1,000 or thereabouts, and for five years it was a bit of a struggle, but then hey presto, inflation, house price bubble, and they paid off the rest of the mortgage out of petty cash in the late 1970s.
So in exchange for five difficult years, they have lived more or less rent and mortgage free for the next forty.
Being a lucky so and so, I bought a house in the mid 1990s and paid off the mortgage in ten years, it was a lot cheaper than renting and earned me a 300% profit when I sold in three years ago.
See also what Fraggles says.
DNA, Frag, ta for back up.
"Older Baby Boomers have no mortgage at all": well we do.
"(unless they were suckered into 'equity withdrawal')": no we weren't.
You young people generalise too much.
Then there's the people who were lucky enough to receive non-repayable interest free loans to buy their houses.
One of my colleagues got one off her ex and one off her Dad, they total about £150k and now she has a spare room to rent out (and the spare half of her bed to her new bf). She doesn't declare this to the taxman either.
So she likes to bang on about how well she is doing (and mock her flatmate who works in a phone shop for wearing crap clothes and being too skint to go out every night).
But the truth is that anyone who got a £150k non-repayable interest free loan and invested it for income would have a nice extra wad of cash every month to buy nice clothes and holidays with.
The money she received in rent is about equal to the sum of the interest she is not paying to her ex-bf and Dad and the tax bill she is dodging!
Having no LVT does just trap some people in poverty and entrench unearned advantage!
D, apparently that's because you chose to pay into a pension pot which will pay it off or something (yet more distortions).
SL, yup, a) having income tax, VAT entrenches poverty and b) not having LVT bayonets the survivors.
As I said before, today's twenty-somethings are the lucky ones, prevented by high house prices from buying into the Ponzi scheme that is the current housing market. They won't be the ones left holding the baby when the whole thing collapses. Maybe they will be the first generation to rediscover the advantages of renting and do it out of choice rather than coercion.
The argument that since current generations have more "stuff" and enjoy better services it is fairs-fair that older generations deserve the equity gain in housing is actually the nub of the issue. Technology and business innovation advances society, generation to generation. With each advance people have (potentially) better work and leisure opportunities, health etc. The economic advance of a society is ultimately manifest in the location value of the land. So long as this remains for the most part un-taxed, in the hands of land owners rather than redistributed across the community there is an inequity between the wealth creators and the land owners. (These may be one and the same allowing a society to be drawn into a housing bubble)
I do think the biggest hurdle for Georgists to overcome is the fact that in many developed societies, people expect to be Rentiers for at least part of their lives.
B, yeah but the government (blue or new labour) will always be there to 'help' them onto the ladder. Ms Caroline Flint just didn't get this point - evene though everybody in the room was screeching "I don't want a soft loan or part-ownership, I want a cheaper house!"
DNA: "I do think the biggest hurdle for Georgists to overcome is the fact that in many developed societies, people expect to be Rentiers for at least part of their lives."
And rightly so - it's called "Citzen's Income". How we share the rental income between children, working age and old people is a separate debate. The rental income is still there, it just gets pre-distributed. Everybody is a small-scale landlord from birth. It's like feudalism without the evil barons keeping all the spoils.
And rightly so - it's called "Citzen's Income". How we share the rental income between children, working age and old people is a separate debate. The rental income is still there, it just gets pre-distributed. Everybody is a small-scale landlord from birth. It's like feudalism without the evil barons keeping all the spoils.
That's a fair call. I should probably have specified in the "traditional" sense of the rentier i.e. from their own private property rather than the community's. In some respects people seek to become "Barons"! I think there is often a desire in western societies (perhaps due to a lifetime of taxes on income) to be financially independent (of the community). Although as described above this is impossible with private landownership.
DNA, no man is an island.
Even if you scrimp and save all your life and build up loads of cash and shares to see you through retirement, you are still dependent on 'the community' honouring their part of the bargain, i.e. paying interest and selling products that people want in order to make profits to pay dividends.
But as you say, people use a lousy tax like income tax as an excuse why we shouldn't have LVT.
"Even if you scrimp and save all your life and build up loads of cash and shares to see you through retirement, you are still dependent on 'the community' honouring their part of the bargain,"
Not if you convert your cash into a literal pot of gold or the equivalent, and finance your retirement by selling it bit by bit. I rather fancy trying this with wine. If everything goes tits up, I can stop selling it and drink myself to death.
B, but then you still require the presence of the police to deter people from nicking your gold; you need goldsmiths to buy it from you, you need people in the economy who earn enough to want to buy it and so on.
Nice.
I just love the reason the struggling family gave for not moving somewhere cheaper:
despite everything, I don’t want to have to move. We have a big mortgage, but I see our home as an investment: a house in Surrey will always be in demand, and anyway I think house prices will rise in future.
Words fail me.
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