The dynamics of the UK’s housing crisis are well-documented: millions prevented from getting on the housing ladder, sky-high rents for often woefully inadequate accommodation and, underpinning it all, a planning system seemingly designed to stop development rather than encourage it (most recently detailed on CapX by Sam Watling today).
Perhaps less well understood is how difficult it has become for younger jobseekers to follow Norman Tebbit’s infamous (and almost always misquoted) injunction to up sticks and find work elsewhere.
Tebbit’s example concerned his Dad getting on his bike to look for work, but the modern British economy often demands youngsters travel a fair bit further to pursue their career dreams in a big city.
Unfortunately, as today’s thorough report from the Resolution Foundation makes clear, housing costs mean that many are shut out of the opportunity to move at all. This isn’t about people being unwilling to make sacrifices, more that it doesn’t make economic sense to move from somewhere with cheap rents and low wages to somewhere that may have higher wages, but has a far higher cost of living too.
It’s not a wholly negative phenomenon. As the report notes, there are more jobs in more deprived parts of the country these days, so the “push” factor of needing to go elsewhere to find work has diminished. The “pull” of more productive areas has also weakened. In 1996 the top decile of local authorities offered an 80 per cent pay premium compared to the bottom decile. That figure has now fallen to 62 per cent.
Looking at specific areas makes this trend especially clear. For instance, if you had moved from Stoke-on-Trent (decile 3) to Croydon (decile 9) back in 1997 you could expect an average earnings boost of 26 per cent after housing costs, today the same move would actually leave you worse off.
The explosion in prices in most of our big cities obviously affects would-be renters, but it is also a big issue for homeowners who might have found their dream job in a different city.
Indeed, this graphic shows that while house prices have risen across the board, they have been most acute in the highest-earning local authorities, while wage growth has been lowest. In absolute terms, people may still be earning considerably more than those in poorer areas, but their purchasing power in the local property market has been steadily eroded.