Nothing captures the breakdown in the postwar economic consensus than the birth of Generation Rent. In Britain, for the parents and grandparents of people my age, home ownership was a right of passage as natural as buying your first drink or getting your first pay cheque.
For most, it’s now a dream as distant as a Caribbean holiday. Less than 20 years ago, the majority of young people in Scotland owned their own home. But from 53 per cent in 1999, the proportion of homeowners among Scotland’s 16-34 year olds has fallen to just 36 per cent.
In that same 18-year period, the proportion of 16-34 year olds in private rented accomodation rose from just 13 per cent to 40 per cent last year, inverting the housing model. More young people in Scotland now help pay someone else’s mortgage rather than their own.
Home ownership figures have rebounded slightly from record lows in the depths of the financial crisis, in large part because the Help to Buy scheme has effectively halved the amount that young people have to save for a deposit, but that only put a dent in what is a worrying long-term trend.
Home ownership, bringing with it responsibility, independence and security, is increasingly out of reach. As a generation grows to believe the economy doesn’t work for them, it’s a pressing social problem, and therefore a political one, too.
Conservative politicians know that growing numbers of young people, watching their bank balance drain away every month when rent is due while wondering how they’ll ever own their own place, aren’t likely to ever vote for them. Defending capitalism from Jeremy Corbyn won’t wash with a growing segment of the electorate that has little capital to defend.
So in his Budget earlier this month, Philip Hammond pulled a rabbit from his hat. Squeezed by his own (albeit gently loosened) fiscal rules and the likelihood of a Brexit writedown in economic growth, the Chancellor couldn’t magic up the £50bn demanded by the Local Government Secretary, Sajid Javid for new homes.
He did, however, find the cash to abolish stamp duty for first-time buyers. In England and Wales, buying your first home is now tax-free for properties costing less than £300,000 with a further tax cut on properties up to £500,000.
These are hefty sums in the Scottish housing market that would get you a handsome pad just about anywhere. However, the announcement still opens up a significant tax gap between Scotland and England, and poses a challenge for finance secretary Derek Mackay when he makes his own budget announcement next week.
On Budget day, when I pointed out on social media that meant first-time buyers purchasing a £250,000 home in Scotland would pay £2,100 in tax while their peers south of the Border will now pay nothing, it prompted a revealing response. “What planet are you living on?” was one of the first replies. It didn’t come from a nationalist keyboard warrior accusing me of #SNPbad bias, but from a Labour MSP representing the Lothians, a region with one of the most overheated housing markets outside London.
I won’t single him out because his comment was actually fairly typical. Dozens of people endorsed the view that it’s ridiculous to suggest young people in Scotland would pay such sums for their first homes.
Many seem to think that because the Scottish Government set the starting level for devolved land and buildings transaction tax at £145,000, only the wealthiest pay the government anything at all when buying their first home.
Evidently none of them have ever tried to buy a flat in Edinburgh. According to the latest figures from estate agents ESPC, the average sale price for a one bedroom flat in parts of the capital now exceeds £182,000.
With young people putting off buying a house due to rising costs, many first-time buyers can also be couples planning a family. In the capital, even after the government’s injection of credit through Help to Buy, the average age for a first-time buyer is still thought to be over 30. A one bedroom flat often just isn’t an option.
House prices in Scotland’s cities are now such that every quarter, nearly 2,000 first-time buyers seek loans to purchase homes costing between £175,000 and £500,000. Anyone paying £195,000 or more for their home is incurring an LBTT bill of at least £1,000.
That’s money that has to be found in cash and upfront. It can’t be borrowed, and it adds to the amount first-time buyers have to save before they can even consider buying a house.
Under Help to Buy, a 5 per cent deposit on a £195,000 property would normally mean a first-time buyer saving £9,750 for a deposit. Add another 10 per cent on top and it puts home ownership that bit further out of reach.
Denying that this is what first-time buyers in some parts of Scotland face is denying the reality of the housing crisis. It concedes that city centres should be slowly cleansed of young people, and that an ever-greater urban sprawl is inevitable as people look further and further out of town for a place to buy that they can afford.
Cities are economic engines, and policy-makers should be encouraging the young people who give them their cultural and economic vibrancy to live there, not tell them they’re on their own. If housing is too expensive, then prices need to come down for everyone.
Hammond’s tax giveaway probably isn’t the way to do it – the Office for Budgetary Responsibility says it will simply inflate prices further. New powers are needed to ensure development land is built on, and existing ones should be used to better effect so that developers keep the cost of new-build homes down. Planners and councillors must do better: Edinburgh’s abundance of unused brownfield sites, hotel developments and student housing are a policy failure.
Ultimately, only additional supply can lower the cost of homes, rather than boosting demand. But denying the true shape of the problem won’t help at all.