Property costs hinder young people’s career development, warns leading think tank

Ours is a dynamic workforce. With social and family groups spread increasingly far and wide, we think nothing of moving from the place we grew up in to go after a decent job, a promising career and, hopefully, a salary to match.

Gone are the days of staying put, of getting a job in a nearby town and being restricted to the jobs on offer there. The whole world is our oyster, the endless possibilities are out there for the taking. As long as you can afford somewhere to live.

Shocking new figures from socioeconomic think tank, the Resolution Foundation has revealed this week that rising rents mean young adults are unable to move to UK cities where average salaries are higher because they can’t afford the cost of living.

In fact, the number of young people in private rented accommodation who moved for a new job has almost halved in the last 20 years.

Broadly dismissing any effects of falling unemployment failing to have the same “push” effects on those looking for work or the “pull” of buoyant areas, the foundation warned that rents have risen by almost 90 per cent in the highest-paying 30 per cent of local authorities over the past 20 years, compared with just over 70 per cent among the 30 per cent lowest paying places.

And that means the wage rise you might expect from a move is smaller than it used to be, and that the boost to your standard of living by moving has also shrunk.

Once housing costs are deducted, the average private renter moving from a low-paying area (such as East Devon) to a mid-paying area (such as Bristol) would have seen a financial gain of 16 per cent in 1997, compared with just 1 per cent last year.

Similarly, moving from a low-paying area straight to a high-paying area (such as Croydon) would have seen a financial gain of 26 per cent in 1997, compared with 3 per cent loss last year.

It’s the same story with ownership. House prices grew four times as fast as wages in the 10 per cent of local authorities with the highest earnings over the past 20 years. In the 10 per cent of local authorities with the lowest earnings, house prices grew by less than three times the rate of wage increases.

“Not only does this increase in price relative to other areas reduce the incentives to move in terms of the impact on ongoing housing costs; the widening absolute gap between earnings and house prices will effectively lock out those without substantial amounts of equity or savings from moving to a more productive area,” the report added.

A degree doesn’t change much either, according to separate data from the Landbay Rental Index. Graduates moving to London for their first job after university, for example, will probably have to spend 40 per cent of their take-home pay on rent.

“Young professionals now need to weigh up a variety of factors, including commuting length, travel costs and, above all, rent,” says John Goodall, CEO and founder of Landbay.

“This is especially true if they hope to save and invest, with the goal of achieving that first step onto the property ladder in the future.”

But even that long-held assumption is increasingly up for debate.

According to a recent survey by Close Brothers, half of non-homeowners don’t think that they’ll ever be able to afford to get on the property ladder, despite home ownership remaining an aspiration for 65 per cent of those who don’t own property.

Across the generations, a quarter of UK employees are spending more than 50 per cent of their monthly income on housing costs. One in 10 is spending more than 70 per cent of their income on a home.

With one in five millennials saying their housing costs are painfully high, it’s little wonder that a similar proportion have been burnt by their bills and now have no desire to get on the property ladder in the future.

“Housing is a key area of financial wellbeing,” says Jeanette Makings, head of financial education at Close Brothers.

“However, there seems to be a gap between perception and reality. While there’s confidence around affordability, a huge proportion of people’s salaries are going on housing costs. This makes saving for the future more difficult and contributes to the scale of uncertainty when it comes to taking the first step onto the property ladder.”

And alleviating that uncertainty is a job for our bosses, Makings argues.

“All of these issues can be improved by a solid financial education programme, supporting employees in their ambitions be they short or long term,” she adds. “Employers can help employees in this respect, improving their financial health and creating a happier and more productive workforce.”