The U.K. 'Youthquake' Was All About the Rent

Frustration with unaffordable housing is driving support for the opposition Labour Party.

For a princely sum.

Photographer: Simon Dawson/Bloomberg

The central issue in British politics is not, as you might have thought, Brexit. It's housing.

New analysis shows that Britain's long-festering housing shortages contributed to the 2017 election that cost the Conservatives their majority. While Brexit divisions cut across party lines, Britain's housing problems overwhelmingly benefit Labour. Now, it seems the government may finally be grasping the extent of the problem. “Young people without family wealth are ‘right to be angry’ at not being able to buy a home,” said Prime Minister Theresa May Monday in a speech focused on housing.

May is right to be worried. After unexpectedly losing her majority at last year’s general election, it was thought -- largely because opinion polls had said so -- that Jeremy Corbyn’s opposition Labour Party had finally succeeded in coaxing left-leaning but politically disengaged under-25s to the polls, a phenomenon dubbed the “youthquake.”

We’ve since learned from the British Election Study (BES), a random probability survey that’s validated against voter files and widely regarded as the gold standard in voting data, that the surge in turnout was not really a youth thing. New analysis of the BES data reveals that the bulk of the increase in turnout, along with the entirety of the swing from the Conservatives to Labour, was attributable to people who rent rather than own their home. The youthquake was in fact a rentquake.

The housing market has always played a role in U.K. politics, and in the British mindset more generally. While Americans have traditionally invested in stocks, Britons have prized real estate. And surging prices have normally been a vote winner.

Perhaps the most noted example of this was in the 1980s, when Margaret Thatcher’s “Right to Buy” scheme allowed public housing tenants to buy their homes at a substantial discount to market, many of them doing so shortly before a housing market boom got under way.

Subsequent decades saw house prices far outpace earnings, and falling home ownership rates. Successive governments failed to ensure supply met demand. As a result, while many of the original right-to-buy owners have become landlords, many younger people -- even fairly affluent professionals -- have found themselves waiting until their 40s to become homeowners.

Analysis of the BES survey data suggests that this trend was critical in 2017. While turnout was virtually unchanged from 2015 among homeowners, it jumped eight points among all renters, and 10 points among those renting in the private sector. Within the latter, turnout increased in almost all age groups, including by 15 points among 25-44 year olds. And while the survey contains too few of these new voters to be precise about how they voted, it’s clear that they favored Labour by an extremely wide margin.

Renters Are Voters Too

Change in turnout, 2015 to 2017, by housing type

Source: Number Cruncher Politics; British Election Study

But Labour didn’t just benefit from new voters; it also gained over 2 million votes from other parties along similar lines. While the Conservatives carried homeowners by identical margins in 2015 and 2017, Labour’s margins widened by 13 points among all renters and by 20 points among private renters. Among renters who voted in both elections, the Tories lost a staggering 29 percent of their 2015 vote, about three-quarters of it switching to Labour.

Renters Prefer Labour

Change in party vote shares from 2015 to 2017 by housing type

Source: Number Cruncher Politics; British Election Study

So while the Tories remain the party of homeowners, the surge in turnout and swing toward Labour among would-be homeowners seems to have made the difference between a clear Conservative win and a humiliating miss.

In other words, the bull market in real estate has become a political liability. A YouGov poll fielded in November found that action to moderately reduce house prices nationally was supported by 59 percent, including 51 percent of homeowners. In fact 41 percent of homeowners were supportive even when asked specifically about their local area. That's not so surprising really: Homeowners may have benefited from the price surges, but their children cannot afford to buy property. Many downsize to help their adult children get on the property ladder.

These trends help to explain the behavior of the 25-44 age group, among which home ownership has plummeted. In the mid-1990s, around two-thirds of those in the younger half of that age group and on median incomes owned their homes, according to a report by the Institute for Fiscal Studies (IFS). By the middle of this decade, that figure had fallen to barely a quarter -- a trend the report blames squarely on the rise in prices relative to incomes.

These trends have been even sharper in London. The IFS report found that for the same cohort in the capital, house prices had jumped to almost 16 times net income from a median multiple of five over the 20-year period. The average property price in London at the end of last year was 496,000 pounds ($685,224). And younger Londoners matter hugely, because there are so many of them -- 45 percent of the city’s adult population is aged 25-44, compared with 33 percent nationally.

The capital’s boroughs will be among the (mostly urban) areas across England that go to the polls to elect their local legislatures in May, elections that look set to be painful for the Conservatives. The party already lost considerable ground in the same areas last June, and is at risk of losing control of boroughs it has controlled for decades.

London once voted the same way as the rest of Britain; in 1992 John Major won both nationally and among Londoners by eight points. But in 2017, Labour lost nationally by 2.5 points, but won the capital by 21 points, a net divergence of almost a point per year. While much of this is due to broader political and demographic trends, housing appears to have been significant in 2017.

Theresa May acknowledged in a Daily Telegraph article timed to coincide with her speech Monday that “it is our children and grandchildren who are paying the price” of inaction on housing. But it is the Conservatives who are paying the price at the ballot box. May is betting that regulatory changes on the supply side will enable sufficient homebuilding to ease the upward pressure on prices. She needs it to -– or the Conservatives they may find themselves being evicted from number 10 Downing Street.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Matt Singh at matt@ncpolitics.uk

    To contact the editor responsible for this story:
    Therese Raphael at traphael4@bloomberg.net

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