It's Not You, It's The Economy: The Real Reason Rents Are So High
The Debrief: Two economic reports that you need to know about...
This is a public service announcement for anyone who feels like they’re doing something wrong because they can’t afford to buy a house/save for the future/keep themselves on an even keel financially. This is for anyone who’s been told that they’re a ‘lazy and entitled’ millennial who doesn’t know ‘how good they have it’. We’re here to tell you something and we want you to remember it every time you feel like you’re perennially smashing your head against a financial brick wall: it’s not you, it’s the economy. It’s not our generation, it’s the fault of those who went before us and the failure of successive governments to see the writing, writ large, on the wall smack bang in front of them.
Today two new reports confirmed what anyone at the sharp end of high housing costs and relatively low wages already knows: pay growth is really, really bad and rents are ‘out of step’ with incomes. Of course, as ever, the people who this hits the hardest are the poorest families and households.
There are two ways of looking at this. Either you take the approach that it’s pretty fucking depressing or you realise that you’re vindicated and let go of the guilt and shame that you feel if you try to make it work and struggle.
First up is a report from a think tank, the Resolution Foundation, which find that we are currently in the midst of the worst decade for pay growth in the UK for last 219 years. Yep that’s right, since the Napoleonic Wars which were two centuries ago!!!
The Resolution Foundation has done an assessment and found that families will miss out on £12,000 in pay growth by 2020. They also found that workers are being hit with what it termed ‘falling real pay’ – this basically means that inflation is exceeding wage growth and causing the cost of living to rise. It’s expected that real wages (this means the amount you earn considered in terms of how much you can actually afford to buy with it, instead of the amount you receive) will not return to the levels they were at before the crash aka the Great Recession of 2007, until 2020. Earlier this week it was also reported that food inflation has doubled in the last month, partly because of the sharp fall in the pound’s value since the EU referendum.
Speaking to The Guardian, the Resolution Foundation’s director, Torsten Bell, said ‘for the poorest third of households this parliament is actually set to be worse than the years following the financial crisis.’
Now, onto an announcement from the Royal Institution of Chartered Surveyors (Rics) who have warned that the most vulnerable tenants in the private rented sector are being pushed out of the housing market because cuts to benefits and the rising cost of housing has meant that rents are ‘increasingly out of step’ with people’s incomes.
The Rics has warned that rents are predicted to rise by more than 20% over the next five years, which will only present an even higher barrier to entry for those who need the private rented sector most: those facing homelessness and relying on housing benefits. For those on middle incomes, it just means that rents will continue to creep up and take over ever larger chunks of our pay packets.
To add insult to economic injury for those already struggling, the Government announced this week that they would go ahead with very unpopular plans to cut housing benefits for 18-21 year-olds.
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