High rents are stopping young people moving away from small towns for better-paid work, report finds

Millennial moving from Sunderland to York will see 24 per drop in earnings after rent is deducted, according to research

When it comes to housing the best way to help this group is to build vastly more social housing and to reverse cuts to housing benefit (Getty/iStock)

Rising rents mean young people are now less likely to move away from small towns to better paying-parts of the country compared to 20 years ago, according to a report.

The number of 25 to 34-year-olds starting a new job and moving home over the course of a year fell by almost half, from 30,000 to 18,000, between 1997 and 2018.

The Resolution Foundation think tank’s report found that any salary increases young people might benefit from by moving to bigger cities are being wiped out by high housing costs.

This is because wages in higher-paying parts of the country have not kept up with rents. Private rents have risen by almost 90 per cent in the UK's highest-paying local authority areas, while rents have increased by just over 70 per cent among the lowest-paying local authority areas.

While previous generations enjoyed a significant increase in living standards by moving to cities like London and Manchester or regional hubs like Leeds and Bristol to develop their careers, now this is no longer the case.

In 1997, after housing costs were deducted from salaries, private renters moving from a low-paying area such as East Devon to a mid-paying area such as Bristol would see a 16 per cent rise in earnings. Today the financial gain would be just 1 per cent.

Moving from low-paying area to a high-paying area, such as Croydon, would have been worth a 26 per cent rise in earnings after rent in 1997 compared to a fall of 3 per cent today. Likewise, moving from Sunderland to York in 1997 see a 6 per cent rise in earnings after rent, but would now result in a 24 per cent drop in earnings.

The report warned noted that lower job mobility can “stunt young people’s pay and career prospects”. It said that this was also making it more difficult for firms to fill skills gaps and for workers to develop new skills.

“Young people today are often stereotyped as being footloose when it comes to work,” said Lindsay Judge, senior policy analyst at Resolution. “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.”

She added: “For young people in particular, there are real advantages to moving when it comes to trying new roles and developing skills – and housing should not be a barrier that prevents them doing this.”

Traditionally, workers living in rented homes have moved around more than those who own their homes. But despite far more young people living in private rented accommodation today compared to twenty years ago, fewer now choose to move.

Rhys Robert Harper, 24, a parliamentary researcher, said he was moving back to Glasgow despite better pay and career prospects in London because of the cost of renting.

“For the past year I’ve been spending half my income renting an ex-council flat in south London with three other people,” he said. “I’ve found renting in London a miserable and soul-sucking experience.

“The conditions in the flat are shocking and the rent is extortionate. When I first moved in there was mould and dried food all up the walls.”

Mr Harper’s current job is coming to an end and after receiving job offers in both London and Glasgow, he decided to move back to Glasgow where he studied.

“Even though my pay and career prospects are better in London, I would need to spend 50 per cent of my net monthly income renting a room. But in Glasgow I’ll be spending about 25 per cent of my net monthly income renting an entire flat.

“It was a trade-off between getting a better job or having better living standards and looking after my mental health. It’s night and day really.”

Hannah Slater, the policy and public affairs manager at Generation Rent, said the report shows that for many young people “private renting is not about flexibility and career mobility, but because they have no other option”.

“In fact, unaffordable private rents are actively preventing young people from having the mobility to seize career opportunities,” she added. “For a society with fair access to opportunities for young people, we need to bring down rents in cities and decentralise our economy with better jobs across the country.”

The Resolution Foundation, an independent think-tank focussed on improving living standards for low and middle income families, analysed official earnings data from the Office for National Statistics going back to 1997. This was cross referenced against statistics on rental payments collated by the Department for Work and Pensions and Hometrack, a property market analytics company.

The report came as the Affordable Housing Commission released research revealing that one in five households across England are facing housing affordability problems.

In the private rented sector, four out of 10 of all those in the bottom half of incomes are paying more than 40 per cent of their household income in rent, the report said.