Younger Workers and Property Ownership

Every person with even a little knowledge about economics would have been cautious about the resumption of growth after the financial crisis and subsequent recession. Among the lessons of the crisis and its effects is that there is no such thing as an asset that cannot lose value. Home ownership may be desirable but this crisis emphatically revealed that homes are not necessarily assets of a different category and when the prices rise beyond reason, then they will come down and leave many owners with huge and unserviceable mortgages. 

With that view in mind, I get a little surprised that articles that fail to caution against the impression that ownership of homes is imperative for all and that rental is an inferior form of consumption of housing services. This piece in the Telegraph is one of many in the British press that has provided summaries of a study undertaken by the Joseph Rowntree Foundation in which it found that the effects of slow growth and lower wages for younger workers will be seen in their inability to acquire homes and may have to resort to renting houses. To be fair, the study brings up the sound economic argument that it is useful to try and improve the efficiency in the house rental markets to ensure that it works better. 

Having just read through the publication by the Institute of Economic Affairs on housing in the United Kingdom, it is clear to me that there should be an broad understanding that rental of residential property is not necessarily inferior to outright ownership especially where individual incomes cannot match prevailing prices. That report goes into comparisons of basic benchmarks for assessing property markets and isolates regulatory gaps and missteps that frames the housing policy in UK in far better light. Its not a bad thing at all that younger people will not own homes because the gap between their incomes and the houses shows that houses are far too expensive to own and even for those with that income, it may be useful to carefully gauge whether renting is better.