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Spoiler: It’s got nothing to do with avocados! By now, you’ve probably heard that Tim Gurner, an Australian property developer, said that the reason 69% of millennials – collectively known as generation rent – don’t own their home isn’t due to rocketing house-prices or stagnant wages, but due to their love of the humble (and delicious) avocado.
Yes, you read that right. According to Mr Gurner, if everybody under 35 just stopped eating avocado on toast, the housing crisis would be solved in an instant. Here’s what he said (just so you don’t think we’re making it up): ‘When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each. We’re at a point now where the expectations of younger people are very, very high.’ When asked whether he thinks young people will never own their own home, he replied: ‘Absolutely, when you’re spending $40 a day on smashed avocados and coffees and not working. Of course.’
The frustrating thing about these quotes – aside from the sheer short-sightedness of them – is that they’re sticky. They play into the stereotype of lazy, entitled and good-for-nothing millennials expecting everything handed to them on a silver platter. And that couldn’t be further from the truth. Millennials are actually workaholics, according to a new study. Plus, when people say things like ‘you’d be able to afford a house if you just worked harder/stopped eating a certain fruit, etc…’ they almost always ignore their own privilege.
The ‘Golden Generation’ often ignore the privilege afforded to them by the boom of the post-war economy and building of affordable housing when they say that Generation Rent doesn’t work hard enough to earn a house. They ignore the fact that, before the mid-90s, it was possible for even those on a modest income to buy a house because of the economy and affordability of housing. Now, those salaries (adjusted for inflation) would stand no chance of getting a mortgage.
So, if it isn’t anything to do with avocados, why are millennials stuck as part of Generation Rent?
Good question. Let’s start by looking at a few stats that have created a perfect storm for Generation Rent. House prices are growing at 7.5% while wages are increasing at a rate of just 1.8%.
In the last 10 years alone, house prices have almost doubled, but wages have barely risen at all. That means that – in real terms – it now takes twice as long to save the same percentage of a property value as a deposit than it did 10 years ago. And that’s not taking into account the cost of living.
The cost of living has gone up considerably. While wages have only increased at a rate of 1.8%, inflation is hovering around the 3% mark (give or take, depending on the economy).
What does this mean in real terms?
Well, it means that it now costs more to buy things like food (and yes, Mr Gurner, that does include avocados).
In fact, last year food cost 4.1% more at the end of the year than it did at the beginning of the year. Again, in real terms, that meant that £1.00 bottle of milk cost £1.041 by the end of the year, while every £1 you earned at the beginning of the year had only grown to £1.018. Rent prices are growing faster than house prices. That’s right, it’s not just buying a house that’s getting more expensive, but living in one owned by another person too. In fact, The Royal Institution of Chartered Surveyors has predicted that rent prices will increase by over 25% in the next half a decade, while property prices are set to grow by around 20%.
As it stands, even before this 25% bump, it is estimated that, on average, a twenty-something will spend £66,800 on rent between the ages of 20 and 30. That’s more than double (or even triple) the amount you’d need to get a deposit and buy a house. If you live in London, we’re sorry to tell you that you can expect to fork out over £100,000 before you hit the big three-oh.
What does this perfect storm mean for Generation Rent?
Well, not only does it mean that Generation Rent now have to save a larger deposit to buy houses, but that in order to save these deposits, they have to content with stagnant wages, sky-high rent prices and an inflated cost of living. And, apparently, super-expensive avocado on toast. The reality of the matter is: buying a house isn’t a realistic goal for most of Generation Rent.
As Shelter put it: ‘Generation Rent are stuck [in] a false economy, perpetuated by rising house prices, buy-to-let schemes, a lack of new housing and a lack of rent control.’
They go further, adding that this housing crisis is ‘preventing the younger generations from the same prosperity and opportunities that every generation that has come before has had.’
What about the government schemes to help? Do they work?
Trying to solve the problem, the Government introduced a number of schemes designed to help Generation Rent out – Help to Buy, NewBuy and FirstBuy. And on the surface, these are great. You save up part of a deposit, and the government will help you out with the other half. But these schemes only address one part of the problem: mortgage affordability. They ignore other issues, like the complete lack of affordable housing across the UK.
According to Shelter, these ‘policies will force house prices even higher, leading to more unsustainable debt for first-time buyers and more people priced out. If we really want to help the next generation get on to the housing ladder, then we need to build more affordable homes.’
So, what’s the solution?
For starters, the Government needs to invest in building affordable housing. At the moment, they spent 400% more subsidising landlords –a staggering £32billion a year – than they do building houses. Even committing £12 billion of that £32 billion over the course of four years could build enough affordable homes to help over 600,000 forgotten families, and make a dent in the affordable housing deficit.
But in the meantime, Shelter suggest that shared ownership could be a ‘real solution for those forgotten families locked out of a home of their own but not willing to take on a life of private renting.’ According to their data, ‘95 percent of low- to middle-income families would be able to afford a three-bedroom home with shared ownership. Helping them to get a place of their own, and escape the short-term contracts and unpredictable nature of renting.’
If this topic has piqued your interest (or fuelled a fire), we’ve written some other articles that you might like too. There’s this one on why millennials are still living with their parents, or this one on ways to start saving for a mortgage in your twenties. That’ll give you something to read over your avocado toast…
- Author The Bamboo Team
- Posted 8 May 2018