Intergenerational sharing of housing

Angus Hanton suggests that the older generation needs official encouragement to downsize

David Willetts recently praised Homeshare International for a project they operate to encourage older people in large houses to lend rooms in their houses to younger people in exchange for help in looking after the house or them (or the garden). Whilst this represents great intergenerational cooperation and does create some wonderful mutually beneficial arrangements, one wonders whether it gets to the heart of the problem.

Housing discussions dwell on the supply side and new building

It is commonplace in housing discussions to move speedily, almost seamlessly, from an acknowledgement of a shortage of housing to analysis of the obstacles to new building. Also interviewers move very quickly from questions of how difficult it is to buy housing to ways in which they could be enabled to borrow more easily and to borrow more.

Both these approaches fail to look at whether the intergenerational distribution of housing is fair and, if not, what might be done about it. In general, purchase of very expensive housing by young people from older people is, from an intergenerational point of view, moving the assets in the wrong direction.

That is because, to the extent that house prices are above rebuilding costs, the buyer is paying a premium for the land.  This premium has become very high as a direct result of the limiting of permissions to build.  To the extent that purchases by younger buyers from older buyers are paying this premium (or scarcity tax), there is a transfer from the younger generation to the older generation.  It is not obvious that in the long term this premium on land will remain.

Housing need out of kilter with housing wealth

We know that a typical family’s housing needs peak when they have children, but nationally housing wealth is concentrated around much older couples and individuals – so there is a serious mismatch. There is also a size-of-unit mismatch, as our housing stock contains more larger units than are needed and too few smaller ones.

Why is housing ownership so intergenerationally unbalanced?

Two factors seem to have contributed to the current impasse: tax and increased longevity.

Taxation of UK housing is by international standards very light. There is no capital gains tax on the sale of a principal private residence, and council taxes are comparatively low. In addition, tax breaks have historically helped current older people to finance their house purchases – in the 1970s and 1980s MIRAS (Mortgage Interest Relief at Source) made borrowing tax-efficient and today tax rules make buy-to-let attractive to older investors.

The fact that people live much longer has meant simply that they tend to stay in their houses for longer: this result is even more pronounced for owner-occupiers than tenants for socio-economic reasons. Putting that point bluntly, the middle classes are both more likely to be owner-occupiers and to live a long time.

Obstacles for older people in downsizing 

Many older people would like to downsize but cannot do so because of the difficulty of finding more suitable accommodation and because they see their homes as good savings vehicles.

Significant changes to the taxation rules would certainly help with this problem, but there is another possibility which could help: the government could establish an official “Downsizing Agency” which would work to encourage the downsizing process to the benefit of all parties. It could help with information, input into the planning process, and generally make people more aware of society’s vested interest to make it easier for older owners to downsize.

Posted on: 26 July, 2011

5 thoughts on “Intergenerational sharing of housing

  1. Adelle Venn

    House sharing in this way is a great way to relieve the stresses that face younger generations today. For instance, having to deal with the possibility that one may never get on the property ladder and the negative effects this has on motivation.

    Yonger generations seem to be on the edge of falling into an endless cycle of glass roofs that most thought only effected the working classes and women. And so, this housing scheme would not only bridge the economic budern upon us but it would also bridge a social gap upon two generations that have little understanding or empathy for each other.

    However, one key issue with this idea is the effect this has on family. I know this does not seem immediate or obvious but stay with me.
    Families are becoming ever more diverse from single, same sex, to the step families. Older generations have had to adapt to the fact that their children may divorce, separate etc, which in term makes their own family structure larger and more diverse with the introduction of step children and an extended family network.
    This blog assumes that older people have the ability to downsize simply because they live in larger houses that are of no use. But older genderations have more involvement in their extended families then before and their lives are more fluid because of this. Simply making the decision to lend rooms or downsize is a commitment that contradicts this and now poses greater problems for them as part of an extended family network.
    Thye no longer have to provide a home for themselves but also a home for grandchildren, step grandchildren etc.

    People now have more involvement in each others lives and simply house sharing may not be possible for the growing amount of people that have a greater commitment to their wider family network.

  2. Dave C

    So because the price of land is absurdly expensive we should turn the young into indentured slaves to maintain the concentration of wealth?

    Given the extreme right wing and selfish-indivualism based society that we have inherited from the baby boomers who sold off all the national wealth to benefit themselves, ran up huge debts that we will have to pay, refused to compromise on climate change and peak oil as they wouldn’t be around to feel it’s ill effects and also forgot to save a penny for their retirement;

    How about the young just make like the boomers, act in their own self interest and euthanise the useless old eaters?

    Alternatively we could just build more affordable houses by kicking the absurd planning laws into touch that allow (yup it’s the nimby boomers again) a certain group of people to stop any development because it might spoil their view.

  3. Stuart Wrigley

    At the risk of introducing rather anecdotal evidence, the Polish side of my family operates what could be described as a ‘hub house’; this is a large, family-sized house which orginally contained two parents and two kids. When the kids left home, a grandparent downsized from a large flat and took one of the spare bedrooms and an extra room for living space. When the children married and had their own children, plans were formulated to build a new family home (self-builds are common in Poland); meanwhile the children’s family would move in with their parents, and grandparent, while the new house is built. The parents will then sell the current hub house and in all likelihood move in to their children’s new large family house, which will become the next ‘hub house’.

    What this probably means is that the highest earning/most economically active generation owns the bulk of the housing stock, which is evidently not the case here in the UK.

    A neat arrangement. No qualms about giving up a large family house, as, in this case, the family seems to mean more than the housing around it. One wonders whether the opposite is the case in Britain. Are those middle class baby boomers with their oversized houses really going to be prepared to give them up?

    I suspect this practice is fairly widespread in Poland, but I only come to this debate with my own single example; I would be interested to know what research has been done on this.

  4. Brian Eggar

    This may be more of a rural solution but I would like to put forward an idea I got a few years ago.

    Many of the problems lie with families with young children. Councils or housing associations should be encouraged to build a small cul de sac for just such groups. The advantages would be that there would never be any complaints about neighbours children as their own could be just as culpable. There could be a lot of sharing on toys, clothes and other equipment. One person in the road could set up as a nursery so that the other parents could go back to work.

    You could even put a gate on the entrance so that children could play out on the street as we all did when we were young.

    As I would anticipate a lot of demand for such a facility, I feel that the fairest way to allot places would be for an open lottery that way people would know that everybody had an equal chance and it could be turned into a publicity event to promote further development.

    I am sure that the same reasoning could be extended to a senior generation although I am not sure if I would like it.

  5. Brian Eggar

    I would like to make another comment.

    Why when the housing stock is so limited that new houses are built without a basement? In Canada, when I stayed in a house there, the basement doubled the amount of usable space.

    I have also been to Poland and in rural areas the houses are of a very flexible design to cope with extended families. In the eighties when I first went there, I was struck by how everybody was willing to help their neighbours but it has changed a lot in the ensuing years.

    Having also stayed at a flat in Warsaw, I found it very pleasant with light streaming into the flat all day. However for flats to work, it requires two things, a very carefully worded social contract to evict disruptive elements quickly and the ground floor turned over to community needs and businesses to promote social cohesion.

    There should be a competition to design the equivalent of the Victorian terraced house to meet today’s needs. Part of that would be met by having no internal supporting walls and having a kitchen at the back with a roof terrace. I would also build some with adjacent workshops to promote small businesses.

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