The rise of the stay-at-home generation is an economic, not a cultural phenomenon
19 December 2013
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19 December 2013
Housing and Planning
I don’t have a ‘favourite blogger’ as such, but if I had to draw up a personal top-five list, it would definitely include Brendan O’Neill. If you are looking for an author who skilfully exposes the authoritarianism, the censoriousness, the snobbery, the Luddism and the perennial hysteria which characterises large sections of the contemporary left, Brendan is your man.
But while most of his columns are spot on, the few which are off the mark really are off by a million miles. His recent post about the rise of the ‘stay-at-home generation’ is one of them.
Brendan is set on the idea that ‘Generation Y’ is a generation of self-indulgent, self-pitying wimps, who should stop whining, grow up, and get a life. So it is grist to his mill that since the mid-1990s, the proportion of 20- to 34-year-olds who still live with their parents has been rising sharply. He rejects the explanation that this is a result of escalating housing costs, and insists that ‘it isn’t hardship that keeps loads of young adults at home, but cowardice, an unwillingness to do what just about every generation before them did: take a risk, leave home, suffer deprivations, live off Pot Noodles […] I think the rise of the “Boomerang Generation” or the “four-car family” or “the stay-at-home generation” – all polite euphemisms for “saddos” – is actually a cultural rather than economic phenomenon. It’s not that these people can’t afford to move out, but that they don’t want to.’
Brendan presents two main arguments to back this claim:
So Brendan essentially argues that somebody who moves out of their parents’ home at a young age today is not worse off than somebody who would have done the same, say, twenty years ago. That may be true, but it is not especially relevant. The big economic change that has occurred since the mid-1990s is that housing costs have increased not just relative to earnings, but also relative to the cost of nearly everything else. This means that the opportunity cost of moving out early has increased massively. Today’s early home-leaver may not be worse off than their counterpart two decades ago, but for every month that they antedate the cutting of the apron strings, they give up a much greater quantity of other goods and services. Expressed in ‘units’ of travelling abroad, clubbing, dining out etc., the cost of leaving the family home early is vastly greater today than in previous decades. It is also vastly greater for a young Brit than it is for a young person in a place where the housing market is not crippled by insane planning restrictions.
A bit of anecdotal evidence on that note: When I started university, almost all of my fellow students had already left their family home, or were about to do so. This was not because they all shared Brendan’s views on moving out early, but because the opportunity cost of moving out was low. If you avoided the fancy areas, and if you were willing to forego a few comforts, you could find places for sensationally low rents. During my first year of studies, I lived in a plattenbau-wasteland in East Berlin, in an area where a visitor from Pyongyang or Minsk would have felt very much at home. But I paid no more than DM220, later €110, inclusive of water, gas and electricity bills. No, not per week. Per month, that is. As to the opportunity cost: a pint of beer, at the time, would have cost just under €3, let’s say €2.75. This means that expressed in units of beer, my flat ‘cost’ 40 pints a month.
Now compare that to London. A three-bedroom flat in Haringey at the 30th percentile of the local rent distribution costs about £1,500 a month, i.e. £500 per head if shared between three. With a pint of beer standing at about £4, this means that for a London student, the opportunity cost of the roof over their head is 125 pints of beer a month. Is it really surprising that big differences in opportunity costs lead to big differences in people’s behaviour?
Brendan is wrong to assert that the stay-at-homes do not ‘want’ to leave the nest, in the sense of somebody who would have to be dragged out kicking and screaming. They do want to move out early – but not at any cost. They want to move out early, but it is not their only goal in life. They also want other things, and if moving out entails giving up so much else, they are prepared to defer it for another year or two.
There is nothing in the British soil which makes homes expensive. They are expensive because there not enough of them in the right places, and there are not enough of them because British housing policies are run for the benefit of the nimbys, the nodams (no development after mine) and the bananas (build absolutely nothing anywhere near anything). Brendan should have spared the easy target, and should have criticised those groups instead. They are the ones who constantly pour out the kind of Luddite arguments which, in his other columns, Brendan usually wipes the floor with. They stand for almost everything he is against, so why does he let them off the hook?
But while most of his columns are spot on, the few which are off the mark really are off by a million miles. His recent post about the rise of the ‘stay-at-home generation’ is one of them.
Brendan is set on the idea that ‘Generation Y’ is a generation of self-indulgent, self-pitying wimps, who should stop whining, grow up, and get a life. So it is grist to his mill that since the mid-1990s, the proportion of 20- to 34-year-olds who still live with their parents has been rising sharply. He rejects the explanation that this is a result of escalating housing costs, and insists that ‘it isn’t hardship that keeps loads of young adults at home, but cowardice, an unwillingness to do what just about every generation before them did: take a risk, leave home, suffer deprivations, live off Pot Noodles […] I think the rise of the “Boomerang Generation” or the “four-car family” or “the stay-at-home generation” – all polite euphemisms for “saddos” – is actually a cultural rather than economic phenomenon. It’s not that these people can’t afford to move out, but that they don’t want to.’
Brendan presents two main arguments to back this claim:
- Many of the stay-at-homes are car owners, which suggests that they are not too hard-pressed.
- In earlier decades, incomes were much lower, but young people still managed to move out of their parents’ home.
So Brendan essentially argues that somebody who moves out of their parents’ home at a young age today is not worse off than somebody who would have done the same, say, twenty years ago. That may be true, but it is not especially relevant. The big economic change that has occurred since the mid-1990s is that housing costs have increased not just relative to earnings, but also relative to the cost of nearly everything else. This means that the opportunity cost of moving out early has increased massively. Today’s early home-leaver may not be worse off than their counterpart two decades ago, but for every month that they antedate the cutting of the apron strings, they give up a much greater quantity of other goods and services. Expressed in ‘units’ of travelling abroad, clubbing, dining out etc., the cost of leaving the family home early is vastly greater today than in previous decades. It is also vastly greater for a young Brit than it is for a young person in a place where the housing market is not crippled by insane planning restrictions.
A bit of anecdotal evidence on that note: When I started university, almost all of my fellow students had already left their family home, or were about to do so. This was not because they all shared Brendan’s views on moving out early, but because the opportunity cost of moving out was low. If you avoided the fancy areas, and if you were willing to forego a few comforts, you could find places for sensationally low rents. During my first year of studies, I lived in a plattenbau-wasteland in East Berlin, in an area where a visitor from Pyongyang or Minsk would have felt very much at home. But I paid no more than DM220, later €110, inclusive of water, gas and electricity bills. No, not per week. Per month, that is. As to the opportunity cost: a pint of beer, at the time, would have cost just under €3, let’s say €2.75. This means that expressed in units of beer, my flat ‘cost’ 40 pints a month.
Now compare that to London. A three-bedroom flat in Haringey at the 30th percentile of the local rent distribution costs about £1,500 a month, i.e. £500 per head if shared between three. With a pint of beer standing at about £4, this means that for a London student, the opportunity cost of the roof over their head is 125 pints of beer a month. Is it really surprising that big differences in opportunity costs lead to big differences in people’s behaviour?
Brendan is wrong to assert that the stay-at-homes do not ‘want’ to leave the nest, in the sense of somebody who would have to be dragged out kicking and screaming. They do want to move out early – but not at any cost. They want to move out early, but it is not their only goal in life. They also want other things, and if moving out entails giving up so much else, they are prepared to defer it for another year or two.
There is nothing in the British soil which makes homes expensive. They are expensive because there not enough of them in the right places, and there are not enough of them because British housing policies are run for the benefit of the nimbys, the nodams (no development after mine) and the bananas (build absolutely nothing anywhere near anything). Brendan should have spared the easy target, and should have criticised those groups instead. They are the ones who constantly pour out the kind of Luddite arguments which, in his other columns, Brendan usually wipes the floor with. They stand for almost everything he is against, so why does he let them off the hook?
8 thoughts on “The rise of the stay-at-home generation is an economic, not a cultural phenomenon”
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‘With a pint of beer standing at around £4’..
Not sure where, or what beer you’ve been drinking Kris but I can bag a pint for half that cost!
Anyhow, you’re right to criticize Brendan’s argument, which is frankly patronising, in many cases untrue and doesn’t consider the obvious problem of lack of property development.
Yes, but, as I know from experience (having lived and studied in Germany), people there (and in other continental countries) don’t actually NEED to own their homes in the way the British do if they’re to have proper living space. And why? Because letting property actually pays off, so not just private individuals but major and reputable companies get into it.
According to this recent survey, the average pint in London costs about £3.60, so Kristian’s estimate seems to be pretty accurate: http://www.mirror.co.uk/money/personal-finance/average-prices-pint-beer-across-2234409
I have deliberately picked a high-end beer price for London (and a moderate beer price for Berlin) in order to bias the figures AGAINST the point I’m trying to make. That’s the very opposite of cherry-picking.
If I had chosen the price of a Hamburger, or something else that costs more or less the same everywhere, the difference in opportunity costs would have been a lot more extreme.
While all this makes sense, and I agree with the idea that the planning laws need to change, there seems to be some massive barriers in the way of reform.
Given that house prices keep rising faster than they ought due to the supply side failings, this means that if the restrictions were lifted and house builders were able to build more freely and equal to demand then house prices would fall. Thus anyone who has already bought a house would, on average, be in negative equity should they have a mortgage, or feel hard done by if they’ve paid off a house that’s now lost a lot of its value. People by homes to live in, but also as an investment.
So long as more than 50% (currently 64% according to ONS) of households are homeowners then there’s not going to be an incentive to change the status quo if peoples lifetime investment is going to fall. (I know that some households will include people who might move out should housing fall in price, but not 14%)
Some houses will still be more attractive than others, you can’t build a 19th century cottage in 2014, there’s only so much space in central London etc, but for the average homeowner the transition will be uncomfortable
Excellent. I make similar arguments are made at meetings of the Intergenerational Foundation, but I will acknowledge the source of any additional clarity I bring to them thanks to reading this.
@ Anonymous;
I see your point. A lot of investments could go bad, and that could depress house prices further. On the plus side, houses are durable goods (each one will survive resale many times over) and few livelihoods would actually be destroyed by such a move.
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I guess one should move the power to levy stamp duty/property tax from Westminster down to Counties;
remove all central government powers to impede (or initiate?) development; and
abolish all green belts (not including Sites of Special Scientific Interest or Areas of Outstanding Natural Beauty)
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It’s a very ugly coincidence that green belts in this country coincide with all the best spots for extra housing capacity. Maybe a cuddly wuddly group of people espousing classical liberalism/ minarchism/ anarcho-capitalism will organise a political party (MP level only) and try to raise a certain corps of expertise andlocal knowhow in every constituency in an intensive five year plan from 2015 to 2020 with the goal of becoming a decisive force in UK politics alongside the statists.
All well and good but two key factors are ALWAYS left out of the equation
population divided resources
energy per capita
If you cant divide a finite cake into slices or dont understand that energy = money ( seldom short of matter, often short of energy to filter that matter into useful stuff )
The oil boom of the 70s and the population boom since the industrial revelation play a key role in today’s state of play’
There is only one reality
Cant count or wont count ?