Votes for rent as Autumn statement squeezes younger workers

The fall statement made it clear: winter is upon our personal finances, and despite the Chancellor’s claims, it’s now the people in the middle who are getting cold.

If you’re renting or have young children, that’s especially the case – but Thursday’s announcement wasn’t exactly for you.

British workers are experiencing two decades of wage stagnation, a squeeze on real incomes on a scale not seen since the 1820s, according to an analysis by think tank Resolution Foundation.

The chancellor has supported the very poor and relieved the very rich (there was some token tax tinkering, but none of the vulgarity rumoured).

Meanwhile, those in the middle face higher council taxes, utility bills and protracted pressure from higher income taxes as thresholds enter deep-freeze.

The pain will be especially strong when you are about to face a frozen threshold. Those earning £50,000 – just below the tax threshold for the higher tax rate – will have to pay almost £2,000 a year in extra income tax by 2028, according to accountant Moore Kingston Smith’s calculations, factoring in the likely impact of the ‘fiscal burden’ as inflation increases the payment.

If you are a parent, the elimination of child support makes this even more expensive. A similar cliff awaits at the £100,000 threshold, where personal allowance dwindles and access to ‘free’ childcare hours is lost.

Young professionals in London and the South East are suffering from a growing sense of impending financial doom – and politicians need to listen to them.

“I’m a reasonably well-paid, middle-class professional, so I feel guilty for whining because I’m obviously better off than so many others,” says Max, a reader in his early 30s who wrote to me after a recent podcast wrote a message.

He rents a house with friends and is in negotiations with their landlord after being hit with a 30 percent rent increase. He has given up all hope of ever buying a house and would have a hard time renting a one-bedroom apartment with his partner.

A raise would be welcome, but it would have to be quite large to cover the increase in his living expenses, which are rising faster than his friends with mortgages. The coming recession only adds to his nervousness.

Almost one in five UK households rent privately and rents are rising across England twice as high seen between 2018 and 2021. Those who cannot afford to buy are in a dire position. “Even if you don’t move, rents will go up as the current shortage dictates market prices,” says real estate expert Henry Pryor.

He doesn’t expect first-time buyers to take advantage of the market’s current woes. “Nine out of ten of my most recent new business inquiries have decided to postpone to next year and it will be Easter before sellers accept prices have changed,” he predicts.

The space renters get for their money has declined by about a fifth in the last 20 years, and when they have to move, finding a new apartment is a nightmare.

Website Spareroom.com reports that seven tenants are currently chasing every available room in London. Expect something akin to an interview if you apply for a shared flat (one friend was even asked for his resume).

I met a TV producer in her 20s this week who has been trying to move from east to west London for months, but rooms and flats anywhere in her price range are being made available online in minutes. Since changing jobs, she spends three hours a day crossing the capital. Your landlord has just served eviction papers because he wants to sell.

Some experts believe more “accidental landlords” could be prompted to sell before Hunt’s capital gains allowance cuts take effect next April, meaning the market could tighten even further.

Other landlords will undoubtedly want out before the Renters’ Reform Bill makes its way through Parliament (Department of Justice Data shows evictions at highest level since records began in 1999).

Those in their 20s and 30s who have managed to buy a home face different financial pressures.

With the Office for Budget Responsibility forecasting a 9 percent fall in home prices, recent buyers are at greater risk of negative equity, and higher loan-to-value ratios result in more expensive mortgage rates.

This only adds to the sense of foreboding when fixed-price offers expire.

Some homeowners may be cutting back on vacations, big purchases, and putting home improvement plans on hold — but I know others who are putting raising a family on hold, aware of the high cost of childcare.

Others — including Jess, a recent guest on the Money Clinic podcast — schedule the conception of their second children to explicitly coincide with the start of 30 “free” hours of childcare for their firstborn.

With no word (if only fleeting) on ​​promised childcare reforms in the doomed ‘mini’ budget and nothing on the horizon to replace Help to Buy, this certainly represents a political opportunity for the Labor party that is pushing them can use?

The promise of free, or much better subsidized, childcare for the under-3s would be a guaranteed vote-picker among the younger generation, as would any government-backed scheme to encourage the construction of rental housing.

Before you ask what magical money tree could fund that generosity, look no further than the homes you currently live in.

One of the many sacred cows the chancellor was allegedly assessing in the run-up to the fall declaration of slaughter was limiting or removing the primary residence relief.

Landlords and second-home owners must pay a capital gains tax on sale, but there is no such tax for homeowners sitting on vast amounts of home ownership after riding the wave of low interest rates.

You might shudder to think of any future administration tinkering with this kind of relief—as someone working hard to pay off my mortgage, I certainly would. But the financial divide between homeowners and renters is widening, and politicians just can’t ignore it.

If you look at this from the perspective of being charged increasing amounts with little security in rent, I can imagine 8 million renters who would have no problem voting for it.

Claer Barrett is Consumer Editor of the FT and author of What They Don’t Teach You About Money. claer.barrett@ft.com; Twitter and Instagram: @Clearb

https://www.ft.com/content/15cef7b9-31c5-4aa0-8faf-f760fba26f04 Votes for rent as Autumn statement squeezes younger workers

Adam Bradshaw

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