All the reasons millennials can't afford a home

According to an EU report

What a fun time to be young. Education is overpriced and undervalued; the job market expects free labour; humanity’s very existence is in the hands of polluting corporations who don’t seem to understand there will be no profits without a planet; and if you’re a UK citizen you didn’t just lose your freedom of movement thanks to a bunch of country-bumpkin boomers, but you also lost your freedom of fornication thanks to an overzealous government who thinks sanctioning casual sex will combat the pandemic we’re living through.

Things might just be manageable if we could zoom-labour and not have sex in the comfort of our own home, but most millennials have been priced out of both the ownership and rental market, leaving them to weather the storm in their childhood bedrooms.

Oh, wasted youth.

This problem isn’t new—and it isn’t getting better. Over the past ten years, house prices have been climbing in Europe and the pandemic actually saw an accelerated growth. Climbing prices coupled with ineffective policy have created an unaffordable housing market, where almost 38% of households at risk of poverty spend more than 40% of their income on housing.

Here’s where it all went wrong. You can find the full EU Parliament report, Policies to Ensure Access to Affordable Housing, here.

Financialisation

The European Parliament reports that one key factor driving this market is “the transformation of housing into a financial asset or commodity”, also known as the financialisation of housing. A recent study on second property ownership in the EU found that “a considerable amount of wealth is held in the form of SPO”, although the 2020 Affordable Housing report stated that “investments in rental housing may be a strategy to supplement absent or low second-tier pension arrangements by those who are inadequately covered by such arrangements.” Emphasis on “may be”:

“Although the financial crisis of 2008 resulted in a number of regulations that restricted access to mortgages to lower income and especially younger populations, evidence suggests that in general, it did not stop the process of housing financialisation in Europe: instead, credit has seemingly been refocused on those who are already most successful, i.e. the emerging landlord class in some housing markets.”

Breaking news: Report reveals what every millennial already knew.

Foreign Investment

Another cause for the financialisation of housing is the increase of foreign investment in European residential property. Europe has a very open investment policy making foreign investment easy, all in the name of globalisation and GDP, but evidence proves that foreign investment in real estate increases local house prices and reduces the rate of home ownership in the area. Research conducted in England and Wales showed that for every 1% increase in residential properties bought by overseas companies house prices increase by 2.1%.

Another 2019 report, Future of Cities, found that recent increases of foreign and corporate investments in residential urban property in some of Europe’s most popular cities saw a sharp increase in housing prices.

Money Laundering

As if the greedy investors weren’t bad enough, we also have to contend with crooked investors laundering cash through Europe’s booming real estate market. Although the EU is yet to pull together any definitive figures on this problem, money-laundering networks in the EU have been exposed in recent years and their schemes included the purchasing of properties.

In a Parliament briefing, the EU concluded:

“…money laundering via real estate transactions results in increases in real estate prices, this pricing people with legal sources of funds out of the market. This impacts not only those people who are rendered unable to purchase housing, but also renters.”

In other words, economics doesn’t trickle down, but corruption does.

AirBnB

Known, for some reason, as the “collaborative economy” platforms like AirBnB which enable short-term accommodation have resulted in decreasing supplies of housing for local residents. Not only does this commercialisation of second homes (or second bedrooms) take away people’s homes, but it also results in increased housing costs. The effect is substantial. A study in Barcelona showed that in neighbourhoods with high AirBnB activity rents increased by 7%.

The report goes on to state that another negative effect of AirBnB is gentrification and segregation. The authors must have forgotten to write something similar in the foreign investment and policy sections.

“Public” Policy

The financialisation of the market could have been combatted with effective policy, but nation states in the EU have pushed privatisation and ownership, resulting in policies that only feed into the market’s existing problems.

Public investments in affordable housing can be categorised as supply-side measures and demand-side measures. Supply-side includes the development and building of social housing, whereas demand-side involves welfare payments to cover housing costs.

The total public expenditure on housing development in the EU has declined by 44% from €48.2 billion in 2009 to €27.5 billion in 2015. At the same time, public expenditure on demand-side housing measures has increased from €54.5 billion to €80.8 billion. Such policies make renters and home owners dependent on the private sector, essentially funding corporate profit whilst abdicating responsibility for citizens.

“According to a number of experts, demand-side policies, instead of improving housing affordability for households with lower and middle income, often result in an increase in local housing prices (sometimes by the magnitude of demand-side policy measures). In doing so, these measures often benefit landlords, landowners and private developers more than the households in need of affordable housing. Demand-side measures are usually oriented towards the supply of housing by the private sector (landlords, housing developers etc.), which is highly responsive to increases in demand. As a consequence, increases in funding for demand-side measures is often met by increasing house prices that eliminate the desired policy outcome, i.e. improved affordability.”

The Bubble

House prices accelerating during a pandemic is evidence of the decoupling of house prices from local incomes, a phenomena which has hit most major European cities. This decoupling increases the risks of housing bubbles forming—and some of the EU’s worst bubbles are at risk of popping. Out of seven world cities with the highest housing bubble risk index, four are in the EU: Munich, Amsterdam, Frankfurt and Paris.

Experts think the Eurozone housing market is heading for a crash, with some investment managers advising their clients to sell out of property. This crash would provide what a decade of policy and privatisation has failed to: increased, affordable supply. It’s a dream many millennials have abandoned, so it’s not without glee we imagine snapping up boomers’ second homes at the bargain we’ve been denied for so long.

Property ≠ Housing

But what about Gen Z? A crashed market might enable some millennials to jump on the property ladder but unless we address the financialsation of housing, younger generations will find themselves in our shoes when the market eventually corrects. Forget Gen Z, even, there are millions of vulnerable groups for whom ownership has never been a right. If millennials are the first educated generation to lose out, why not put our under-utilised-in-shitty-entry-level-jobs brains to the test and figure out how to reclaim property as housing.

There are great initiatives to study and develop. Germany excels at housing cooperatives, which sees groups take out low-interest mortgages subsidised by the government to build or refurbish houses. Members buy shares in the cooperative which provides them with security through a perpetual lease. 2.2 million cooperatives serve 4.6 million residents in Germany today, and the EU Parliament recommends member states emulate this model.

Another important initiative that cannot be ignored when writing about housing is those seeing success at eradicating homelessness. Housing First provides permanent residences for homeless people without making them jump through hoops of behaviour correction. These programs have seen great success throughout Europe and North America.

Shifting from property as a financial asset to housing as a common right only serves existing communities and future societies: The World Economic Forum’s Global Risk Report warns of an asset bubble burst in the next 3–5 years.

Hoping that prices and profit will only continue to increase on a warming planet with depleting resources is not only an exercise in futility, but also a lost opportunity to reimagine how we relate to one another. Reorganisation is critical. Millennials may not have the same opportunities afforded to generations past, but we can be the generation that ensures not all opportunity is lost for the future.

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