High rents limiting young people’s mobility

Young people are being prevented from moving to better paid jobs because of the high cost of being a tenant.

High rents are preventing young people from moving to better paid jobs with mobility nearly halving during the past two decades.

Only 18,000 people aged between 25 and 34 started a new job and moved to a new home in 2018, down from 30,000 in 1997, according to a report by the Resolution Foundation.

The group blamed the situation on the high housing costs young people face, which in many cases almost negated the higher salary they would earn by moving to a different part of the country.

It found that once housing costs were deducted, the average private renter moving from a low-paying area, such as East Devon, to a mid-paying area, such as Bristol, would be just 1% better off, compared with being 16% better off in 1997.

The situation was even more extreme for someone moving from a low-paying area straight to a high-paying one, such as Croydon. While young people would have seen a financial gain of 26% in 1997 for making such a move, last year they would actually have been 3% worse off.

Lindsay Judge, senior policy analyst at the Resolution Foundation, said: “Young people today are often stereotyped as being footloose when it comes to work. But in fact, they are moving around for new job opportunities far less frequently than they used to.

“A key reason why people move around for work is the lure of a bigger salary. But increasingly those pay gains are being swallowed up by high housing costs.”

Why is this happening?

The report found people were less mobile despite a higher proportion living in the private rented sector, which is traditionally associated with enabling mobility.

Instead, it said the high rents they faced paying meant moving to a better paid job in a more expensive location often did not make financial sense or reduced the lifestyle uplift they would receive.

It pointed out that rents have risen fastest in higher-paying areas of the country, increasing by almost 90% in these locations, compared with a jump of 70% in places where pay was lowest.

The Foundation noted, however, that there were also likely to be non-financial reasons why young people weren’t moving, such as preferring to stay close to their parents and local networks.

Who does it affect?

Young people living in the private rented sector were the least likely to be mobile compared with homeowners or those in social housing, with the number of people changing their job and home in the past year falling by two-thirds compared with 1997.

But the situation also affects other age-groups, with the increasing price gap between property in low-paying areas and that in higher paying ones making it harder for older homeowners to move without having to significantly downsize.

What’s the background?

The report warned that the lack of mobility could stunt young people’s pay and career prospects.

It found that the typical pay rise was three times higher for those who moved area for work, compared with those who stayed in the same job.

While the situation makes grim reading for young people, it is worth remembering that even expensive locations often still have pockets of affordability.

Top 3 takeaways

  • High rents are preventing young people from moving to better paid jobs with mobility nearly halving during the past two decades

  • Only 18,000 people aged between 25 and 34 started a new job and moved to a new home in 2018, down from 30,000 in 1997

  • High housing costs are negating the higher salary people would earn by moving to a different part of the country.

by Blackstones