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Do I have to choose between a home or a pension?

Ed Hooper

Do I have to choose between a home or a pension?

Like many people in their 20s living in London, I spend a large amount of my income on rent and often find myself anxiously eying my bank balance as the payment day approaches. While I consider myself luckier than many others, having a good flat near my work, with a very decent landlord, there is always a niggling worry at the back of my mind that I may end up being one of the many people who go on renting well into their 30s and 40s, due to the incredible cost of buying in London.

Everyone is aware of how property prices have outstripped incomes within the last 25 years, but the true ramifications of this have only become recognised as genuine areas of concern more recently. As young people lose hope of ever buying, they have begun to move out of the capital in search of a better quality of life, depriving the city of some of its vibrancy and creativity. Key workers, such as nurses, cleaners, and social workers, vital to the fabric of any large community, see their incomes swallowed by ever increasing rent and travel costs, having often been pushed to the outskirts of the city. Finally, those in middle age who were unlucky enough to have not bought property early on, now contemplate living out their retirement as tenants, putting added pressure on pensions, not to mention all the associated stress of renting privately. These trends are changing how we save and manage our wealth.

Those able to buy before prices skyrocketed have of course been extremely lucky. However, those who missed out, generally in their 20s and 30s, often eye their parents’ generation with a degree of (understandable) envy. While those who bought at the right time cannot and should not be punished for having done so, more needs to be done to bridge the gap in quality of life between the generations. If this is not addressed, one can see swathes of London becoming occupied solely by the rich, their children and the retired. This is hardly the character expected of a vibrant, global city, and has troubling implications for social and generational unity.

Steps taken so far have been largely inadequate. Help to Buy was widely criticised, as the financial benefit was only received when the purchase of a house was already complete. Councils and housing associations continue to sell off properties at significant discounts, with few being replaced. Shared ownership appears promising on the surface, yet a recent development in south London requires an applicant for a one bed apartment to have an income for at least £65,000, hardly a realistic figure for any young person who does not work in banking.

While property ownership should not be considered a right, the prospect of entire families locked into inadequate and expensive rental agreements for the long term raises questions around the future prosperity of our communities. Money spent on rent could otherwise be saved for increasingly long retirements, as well as the care and health costs associated with old age. Private tenancies in the UK are notoriously unstable and short-term, and an increase in families housed in this way may lead to a decline in the number of established and integrated communities.

The recent government white paper on housing admitted that England’s housing market is broken, yet the suggested solutions were feeble. Incentives for developers to build did not go far enough, while measures aimed at benefiting renters largely stopped at banning letting agent fees. The Green Belt, an area three times the size of London, continues to be off limits for housing, though I have yet to meet a Londoner who regularly enjoys the space, rather than going to one of the capital’s many parks.

Generous company pension schemes are a thing of the past, and the cost of housing weighs heavily on young peoples’ ability to independently save for their future. No wonder many choose to spend their savings on ‘experiences’ such as holidays, rather than put it toward the seemingly futile goal of property ownership or a sufficient pension. We are often told that we as a nation are not saving enough. Given the current state of the London housing market, this looks set to continue, with a clearer divide between the housing-haves and have-nots.

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