We’ve seen a lot in the press over the holidays about house prices and property bubbles but I wanted to highlight what I believe this year will be all about for generation rent. In previous blog entries I have spoken much about the baby boomers hoovering up all the properties to bolster their pensions by renting them out. I believe this year they will kick generations x, y and z in the teeth all over again, so allow me to explain why…

2014 is the year where everything will suddenly get much better. It will be like magic, all the doom and gloom will evaporate along with the winter clouds. News of the economic recovery, an end in sight to austerity will leap from newspaper pages faster than the green shoots can poke their head through the soil. The reason for this – why it’s the year before an election.

Short term policies will pay off  this year and suddenly the british people will once again be bribed into voting for a handful of broken promises as happened last time. For us, generation rent, the outcome of this election has never been more critical, but we may sleepwalk ourselves into a disaster.

Baby Boomers Are Better Off

The state pension has increased over the last ten years at a higher rate than that of Consumer Price Index inflation. The average  income received from the state pension has grown by an estimated 14% for men and 23% for women in real terms over this time.

Basically the state pension is providing not a great living but it accounts for 20% of total government spending. As the chart shows that is the largest single beneficiary of public funds. Once you factor in healthcare costs, which are used more by the baby boomers than any other age demographic, it’s not hard to see how much tax revenue is being spent on one particular group of people.

Source: http://www.ukpublicspending.co.uk

Don’t get me wrong,this is important. People should be looked after and particularly when they are old and at their most venerable. The issue doesn’t lie there and is certainly a whole other debate beyond property but there is an impact to our generation rent debate.

 

Pensioners Vote

Pensioners Voting

“I want people to know that they can have dignity and security in their old age”

David Cameron

Ask yourself why this week David Cameron has promised to “triple lock” the state pension to a minimum 2.5% increase after the next election? On the same day Pensions Minister, Steve Webb, stopped short of announcing a new policy but did raise the concept of being able to “switch” pension annuities. It would seem that despite an additional £25bn of further cuts to come the coalition is snuggling up to the baby boomers. Why? Simply because they actually go out and vote.

The reason this impacts the debate on housing is very simple, there is no debate. I have searched and searched for some information on the conservatives housing policy should they be elected in 2015 and been left wanting for any information at all.

Labour on the other hand do have a 50 point plan here which mainly focuses on building more homes which we will likely not see the fruits of for a decade if at all. They do, however, recognise the problem in the rental sector and are saying “The private rented sector should be modernised and reformed, with longer tenancies, greater security, more predictable rents, better regulation, and proper enforcement of safety and decency standards.” Well, it’s a start.

The liberal democrats seem to make a few wistful statements like “We believe there should be good, simple, cheap homes to rent for people who can’t afford to buy so no-one’s left without somewhere decent to live.” Which means nothing at all so what are we left with?

Nothing. I suppose at a push Labour are the only party that seems to recognise the issues of generation rent but they are far from championing the cause.

Conclusion

No matter who generation rent votes for it would appear the politicians, whilst aware of the issues, will not address them. They are too busy trying to woo the voting baby boomers to bother with the generation that is working hard to pay the taxes to fund this political indulgence. It could be argued that despite paying into the national pension pot all their lives the boomers deserve all they receive, however, they managed to vote in successive governments that never put the money aside because they where so busy funding tax cuts for the boomers when that mattered to them back in the day.

By example, Norway has amassed the world’s largest sovereign fund using it’s vast oil revenues. They are putting money aside for when the oil runs out, investing and growing it wisely. The boomers where in a similar position in the early 1980’s but the government they chose at the time chose to use the oil revenue to fund short term tax cuts and not their pensions.

So it’s generation rent that’s left working low wage jobs to fund the renting of the boomers second homes, paying for the state pensions, free bus passes and generous healthcare.

All that before I mention the fact that most of the deficit debt owed in government bonds is held by the pension companies in order to pay the generous final salary pensions the boomers got the very last of.

Write to your MP, tell your friends, support initiatives, above all vote, no matter how pointless it feels.

Make your voice heard on this because remember – everywhere you turn these days an old person is literally robbing you – and not just of a home.