“Maybe this is as good as it gets??” (Jack Nicholson; As Good as it Gets; 1997)
In this line from the quirky 90s comedy a once a far-off warning to my then teenage self now carries more weight than ever as I get older: that even by living life to the full, pursuing your dreams and earnings potential as much as possible will not necessarily equate to life-satisfaction you though you’d end up with. What if, at 34, and living in a nice town, with a beautiful wife and child, a respectful job and in my own property – this is as good as it gets??
For my generation of the 80s, the consensus was that opportunities would be abound for career progression, increases in purchasing power and material wealth gains which to buy a nice house and have a family. That vision now seems limited to the lucky few.
For the UK, the early 1980s was a period of recovery from the oil crisis of the previous decade, while the latter half represented excess and boom due to the national embrace of neoliberalism, represented best by Thatcher’s opening up of the Stock Exchange and crushing of the miner’s strikes. In this context of material excess and inflation, there seemed – looking back – easy availability to housing that could not only meet your needs and aspirations, but which you could also afford. This situation seems to have diminished, especially in the south east.
In 1998 my father decided to sell our family home – a 5 bed detached house, with front drive, large rear garden and located within a sought after part of Nottingham – for around £87,000. I was 16 at the time and gutted we were moving away. This aside, my Dad was probably earning around £ 34,000 in 1998 (I asked him), as he had been working for a University for a long time. A simple website inflation calculation puts his salary at around £54,000 in 2016. Today, the same house (although improved internally and slightly extended) is now worth around £480,000 (or around half a million pounds!). Obviously while not the most scientific or watertight approach, if we the put this same wage equivalent into a mortgage calculator to establish how much someone on that salary would now be able to borrow, this comes to around £256,000. (N.B. This does not include potential debts a borrower might have, child-care outgoings or other liabilities which could detract from the final overall lending amount). So, in all, even if my Dad was earning £54,000 today, a £256,000 mortgage offer would mean he wound’t be able to buy the same 5 bed detached home he sold in 1998, let alone more modest 2-3 bedroom terraces in the same area. That’s housing inflation, y’all!
Another side to my “maybe this is as good as it gets” status anxiety is that we don’t all end up earning as much as our parents; perhaps due to different life chances, skill-sets, a lack of self discipline or even plane bad luck. Perhaps now at my earnings peak I am hitting just above the £30k mark. Mortgage providers (using the same calculator) would be willing to lend me around £142,500 (although I have a child and car payments for a 2nd hand car). To put that into some kind of perspective in York, where we live, £142,500 won’t even get you a static home in the countryside near York, let alone a static home (or ‘bungalow’ as advertised by an Estate Agent) within the vicinity of the area we used to live as a family in the nineties – shame on me.
Now don’t get me wrong, a home is a home (and I’m not knocking those living in static/garden/lodge homes), but the ability for our generation to aspire to live in housing that gives us similar opportunities to enjoy indoor and outdoor space, live comfortably and have room to expand (as my parents had) is now massively reduced. My childhood aspirations are being marred by acute year on year house price rises, which have led to housing affordability being massively out of reach to even those with decent incomes. This inflationary rise in house prices has not been helped by dwindling salary/ wage growth over the past 20 years, with ONS evidence suggesting that real wages have actually began to fall since 2009:
Since 2009 all three groups have seen earnings fall in real terms. Earnings have fallen by 10% (-3.2% per year) for those who started in 1995, by 11% (-2.7% per year) for those who started in 1985 and by 12% (-2.6% per year) for those who started in 1975.
(Pg 4 – UK Wages over the Last 4 Decades: 2014)
Although not inevitable, it is possible that the toxic mix of unstoppable house price inflation and wage depreciation/ stagnation will continue to divide society between the haves and the have-not’s. In simple terms, those whose parents who have made even modest equity gains are more than likely (especially compared to those who parents who have been renting) to be able to offer guarantor support or even housing deposits to enable their children to get on the housing ladder. In addition, the same parents will also be able – although a lot depends on the contents/ allocation of a will – to pass capital to their children when they die (yep, those same individuals who received helped in getting on the ladder in the first place). This process of ‘double gain’ [my term] is noted by the author John Hills in his excellent book: Good Times, Bad Times – very much worth a read!!
How does the UK housing market impact on me and my family’s aspirations?
While, at first, my £142,500 mortgage offer seems likely only enough to get me and my family housed within a holiday home in Skegness, we did in fact get lucky and in 2014 got onto a scheme where we pay only half a mortgage for a property that we fully own (via a housing association). The result is that we have a nice top floor ‘apartment’ which we live in, in a good area and with the ability to walk into the historic centre of York within 15 minutes. All that being said, it was a two bed property and we had no room to expand or have any outdoor space. Without wanting to sound ungrateful (which I am not), while we found the place more than adequate to fulfill our needs, we knew that we would need to move to be able to be able to have another child and affordability in York is very limited (i.e. our two wages combined would give us mortgage affordability of around £180,000). The result is that we will likely have to move out of this part of York or even to to a cheaper town, where housing affordability is less of an issue, which in the UK is a dwindling prospect. While such towns exist, we find ourselves in the position where we might have to start over again and we have already lived together in Nottingham, Sheffield, Cambridge and now York. It would be good if we could settle somewhere for longer than 2-3 years.
I only managed to get into the position of earning £30k after having completed two degrees and having spent a lot of money on funding myself through University. I am lucky – to a point – to have had that opportunity; while others are perhaps not. We were also fortunate that York Council’s affordable housing scheme is generous, even more so than those in ‘cheaper’ cities, principally as the Council recognises that there is an acute housing affordability to earnings ratio, and offers Discount For Sale (or similar) schemes; less the city suffer an exodus of skilled workers. The city is also steeped in altruism and philanthropy, with the Joseph Rowntree Foundation still offering discounted homes in the style of George Bailey’s Building and Loan (see It’s a Wonderful Life). We also previously benefited from an “affordable rent” scheme, which basically meant we paid 60-70% of the market rent in our last place, thus enabling us to save for a deposit. For those who cannot access such schemes, or whose salaries don’t enable saving, the picture – one can only presume – is likely to be much bleaker and the prospect of owning a property more unlikely, unless Mum and Dad are willing and able.
Limit your Aspirations?