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We often talk about the housing affordability crisis and the associated economic challenges facing young people as if they were the same in every developed Western country. Insufficient housing construction has sent rents and prices soaring, creating overheated housing markets that force twenty or thirty people to choose between a broken bank balance and broken dreams.
On the surface, the situation in different countries looks similar. In the United States, rising rents and housing prices have prompted a group of young people to leave star cities like San Francisco and New York for cities like Austin and Denver. In Britain, those leaving London are increasingly heading to cities such as Bristol.
But, in case it's not immediately obvious, these migrations are not the same.
Suppose a successful young Briton—defined for the purpose of this argument as someone in the 75th percentile of the income distribution among people under 40—chose Bristol rather than London to avoid exorbitant rents and seven-figure house prices. Their housing costs will certainly be lower, but their income will be much higher. After deducting housing costs, choosing a cheaper home in Bristol would still result in a 23 per cent drop in net income, according to my calculations.
By contrast, a similar young American reluctant to pay rent in New York could head to much cheaper Denver and end up better off overall, or head south to Austin and be only 2 percent worse off at the end of the month. This reflects the impressive and growing dynamism of America's second-tier cities.
This gap in available alternatives highlights the less discussed half of any housing crisis, and in Britain in particular – it relates to the geography of good jobs, as well as house prices and rental costs.
For graduates looking for a successful, high-paying career, America offers many paths in many places. In the UK, it's increasingly becoming like London or bust, and it's becoming more than that. Just under half of the highest-paid jobs in Britain were in London 30 years ago. Today that number is about 75 percent. Senior salaries are much less concentrated in the United States, and are no longer growing that way.
Indeed, the share of skilled jobs in the American knowledge sector that can 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 member of the G7 where the best jobs have become more concentrated in the star region over the past two decades. Even unipolar France is now less focused on Paris, with Lyon gaining more ground in terms of share of top jobs. Although Japan is more focused on Tokyo than ever before, it is at least building homes there.
Rising housing costs in major cities are a widespread problem today, but young Britons face a uniquely toxic disparity in an expensive capital, which is also increasingly becoming the only place they can get a first-class career. This makes it particularly important that two of the Labor government's key policies succeed.
Firstly, Planning reforms Which aims to kick-start a new era of housebuilding across the UK and is a key step in relieving pressures on young people. However, people need fulfilling jobs, not just cheap rents. This is where further steps are taken Delegation of authority Moving away from London and enabling cities to compete with the capital are also key.
A report last week showed that Britain has the highest proportion of workers Overqualified for their jobs In all OECD countries. The concentration of graduate roles in its capital is believed to be largely responsible for this.
If you want to avoid Collapse of youth beliefs In order for them to succeed, you have to fulfill society's implicit promise that if they apply themselves, they will get the future they deserve.
