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We often talk about the housing affordability crisis and the associated economic challenges facing young adults as if they were the same in every developed western country. Insufficient housebuilding has sent rents and prices soaring, resulting in superheated housing markets that leave twenty and thirtysomethings forced to choose between a broken bank balance and broken dreams.
On the surface, the situation in different countries does look similar. In the US, rising rents and house prices have resulted in a cohort of young adults quitting superstar cities such as San Francisco and New York and heading for the likes of Austin and Denver. In Britain, those leaving London are increasingly heading for cities such as Bristol.
But, in case it isn’t immediately obvious, these migrations are not the same.
Let’s say a high-flying young Briton — defined for the purpose of this argument as someone at the 75th percentile of the income distribution among under-40s — opts for Bristol over London in order to avoid eye-watering rents and seven-digit house prices. Their housing costs would certainly be lower, but their income would be far more so. Net of housing costs, choosing a cheaper home in Bristol would still result in a 23 per cent cut in net income, according to my calculations.
By contrast, an equivalent young American who baulks at rents in New York could head to much cheaper Denver and end up better off overall, or go south to Austin and be only 2 per cent worse off at the end of the month. This speaks to the impressive and increasing dynamism of America’s second-tier cities.
This gulf in the alternatives available highlights the less-discussed half of any housing crisis, and Britain’s in particular — it is about the geography of good jobs as well as house prices and rental costs.
For graduates seeking a successful, high-paying career, America offers many paths in many places. In the UK, it’s increasingly London or bust and has only been growing more so. Just under half of Britain’s very highest paying jobs were located in London 30 years ago. Today that figure is almost 75 per cent. Top salaries are far less concentrated in the US, and are not growing any more so.
In fact, the share of America’s skilled knowledge sector jobs that are to be found in New York and California has been declining in recent years. Instead these roles are becoming more common in states like Texas.
By contrast, the UK is the only western G7 member where the best jobs have become much more concentrated in the superstar region over the past two decades. Even mono-polar France is now less Paris-centric as Lyon gains ground in terms of the share of top jobs. And while it is true that Japan is becoming ever more Tokyo-centric, there they at least build houses.
High housing costs in major cities are a widespread problem today, but young Brits face a uniquely toxic variation in having an extortionate capital city that is also increasingly the only place where a top-tier career is possible. This makes it particularly critical that two of the Labour government’s headline policies succeed.
First, planning reforms that aim to kick-start a new era of housebuilding across the UK are one essential step in easing the pressures on young adults. However, people need fulfilling careers, not just cheaper rents. This is where further steps to devolve power away from London and empower cities to compete with the capital are also key.
A report last week showed that Britain has the highest share of workers who are overqualified for their jobs across all OECD countries. It is thought the concentration of graduate roles in its capital is significantly to blame for this.
If you want to avoid the breakdown in young people’s belief that they can succeed, you have to make good on society’s implicit promise that if they apply themselves, they will get the future they have earned.
john.burn-murdoch@ft.com, @jburnmurdoch
