It’s a rare thing for me to find myself any form of a trendsetter, but on one measure, it seems, I was way ahead of the pack. The main reason that I found myself, some years ago, with the almost impossibly unlikely ability to buy a flat in London is because I inherited some money from my grandfather.
In this, it turns out, I was anticipating the May government’s housing policy, a decade or more before it came into existence. Here’s housing minister Gavin Barwell, as quoted in today’s Telegraph:
“I have got a nice home, I have got three kids and my mother has just disinherited my brother and I in order that she can pass her assets on to her five grandchildren. They will be OK.”
Asked if others should think about transferring wealth down generations like this, he said: “Yes, absolutely. Generally in life we all like to think that our children are going to be better off than us. In terms of life expectancy and new technology, they are going to be. But at the moment as things stand they are less likely to own their own home and we need to do something about that.”
The story is headlined: “Inheritance should skip a generation, says minister”.
Other media outlets have reported Barwell’s comments as if he thinks this is an actual solution to the actually existing housing crisis. That may be a little unfair: there’s nothing in those quotes to suggest that Barwell thinks this is a magic bullet.
But even so, this is such a ludicrous idea that I think it’s still worth ripping the idea to shreds, setting fire to what’s left and then stamping the resulting ashes into the ground. So:
Not everyone has rich grandparents
This shouldn’t need stating but apparently it does. Not all old people own homes, and even when they do they’re not all of sufficient value to sort out the next generation but one. (Apropos of nothing, today’s stories remind me of The Onion‘s take on John McCain’s plan to drag the US out of the 2008 economic crisis: “Everyone marry a beer heiress”.)
Any housing policy that’s dependent on inheritance will serve mainly to entrench inequality: rich families will stay rich, poor families will stay poor. Except that it’s not clear that rich families will stay rich either because…
This only works for small families
The Barwell Plan worked out well for me in large part because my grandfather’s family was small (two daughters, two grandsons). If he’d had four kids and I’d been one of, say, 12 cousins, I’d be a lot less sorted and smug about it today.
While we’re at it:
Pensioner wealth could get swallowed by care costs
Okay, today’s pensioners are the richest we’ve ever had: research by retirement adviser Age Partnership suggests that England’s over 55s now own property worth more (£1.5trn) than the that entire GDP of Italy (£1.4trn). Sure, many individual pensioners are poor; but as a cohort, they’re loaded.
However: not all of this is going to be available to their kids when they snuff it. Some old people are going to end up needing residential care, and residential care is bloody expensive.
In other words, even if you are one the only grandchild of some rich grandparents, and you stand to inherit some money – you probably shouldn’t bet your house on it.
One slightly distressing side effect of all this:
It risks incentivising kids to want their grandparents dead
I mean, I don’t want to get all dark here, but we’re going to create a situation in which people will face a direct choice between
a) making sure that granny has everything she wants to be comfortable and cared for, and
b) not doing that but having some hope of maybe owning a house one day.
(“I mean, can’t we at least go for the cheaper care home? Will she even notice the difference. She’s not really with it these days anyway. What? What are you looking at me like that for? What?”)
Barwell’s plan assumes that the parents are fine
And there’s a growing chance that they’re not: we’re moving into a world where plenty of parents are sitting on enormous mortgages, or don’t own a home at all.
So skipping a generation and leaving all the money to the kids probably isn’t going to help. I mean, just look at discord this sowed when Peggy Woolley disinherited Tony in The Archers.
I said at the top of this thing that I thought people had been a little unfair to Barwell, a man who – as far as I can tell – had said nothing to suggest that he thinks this is really a solution to the housing crisis.
The fact he is talking about this at all, though, is a sign of one way in which he is getting things terribly wrong:
It’s misdiagnosing the problem
By talking about the important of passing housing wealth down, Barwell is treating the housing crisis as a matter of tenure. In his mind, the key to the problem seems to be that young people are being shut out of home ownership. (His attack on Labour leader Jeremy Corbyn for wanting to build new council housing – a move he describes as anti-aspirational – suggests much the same.)
But falling ownership isn’t the disease, but a symptom. The big problems here are that housing costs are too high, and homelessness is on the rise – and that’s because we aren’t building enough bloody houses.
Changing how we pass existing homes around isn’t going to solve anything. We need more of them. Get to it, minister.
Jonn Elledge is the editor of CityMetric. He is on Twitter, far too much, as @jonnelledge.