to be scared of the future? what will become of people like us?? pensions / housing related

[applejacket]

dh is 42, i am 34, we don't own our house, and never likely to (bad credit in past plus not high enough income for mortgage and barely any savings for deposit etc). we rent a council house atm

dh has worked FT consistently since 15 but he has only just started paying into his company pension as they have to now. but will probably be worth fuck all when he retires

i am a SAHM with 2 dcs, 4 and 7, and one on the way , i worked from 16 - 26 full time and last couple of years have done a bit of self employed cleaning work but hardly anything really and not doing it anymore now i am pg.

dh earns ok money but not enough to either get a mortgage, or save anything. we don't struggle day to day at all really, but dont really have anything to save. and recently i have been really worried about the future

i am intending to go back to work when the dcs are older but god knows who would employ me, i have no qualifications other than some average gcse's and a levels from nearly 20 years ago. and i can't afford to re train in anything either

what will happen to us when we are older?? when we are still renting and retired? will we be homeless? tbh its the fact we are renting that scares me the most, i would feel so much more secure if we owned our house.

i honestly sometimes feel that our only hope is a lottery win or something

In which case, Jennifer, I don't think the hostility is directed at you.

There might be good reasons why many people don't like the thought of landlordism. You say you plan to live off the rental income in your old age. But that means you're directly living off other people's work and profiting from their need for housing. Housing is not a good in quite the same way as buying an apple in the market. It is not an elastic commodity but a need. Everyone needs somewhere to live, so if some people buy more than one house (because they have a financial advantage over others), then they are directly depriving someone else of the opportunity to buy a house. (This has all sorts of real-world effects like pushing up prices so that people who would otherwise have been able to buy now can't.)

But at a basic level, imagine two markets. In one, there are X number of households and X houses. Each household owns a house and pays the mortgage off through their own earnings. Then imagine another market where there are X number of households and the same number of houses, but half of the people own all of the houses and the other half pay their earnings in rent but never own the houses. In the second example the house owners are clearly profiting from the non-house owners, no? Since housing is a need, the owners are taking advantage of the others' need -it isn't a fair or free market because the non-owners have to take part; they can't decline. In social terms this seems unfair or unequal, hence many people's disapproval of it, since it seeks directly to profit from other people's basic human need for shelter, not just their labour.

For this reason in economists this is called "rent-seeking", and it is thought of as unproductive in economic terms because it seeks to capture a profit from someone else's need rather than to invest in activities which create economic growth (and it skews the relevant market). (You can "rent-seek" in lots of ways that aren't literally renting out property, but rent-seeking is thought of negatively in economic terms because it is economically unproductive.)

Rent-seeking also creates perverse incentives in an economy which can have negative effects more widely. On a basic level, you might be intending to live off your tenants in your retirement. But have you thought about how your tenants will be housed when they retire? Your taxes will go up in order to pay for their housing, so your standard of living will be affected by your tenants not owning a house. If enough people haven't got a house, or any means to pay for one in retirement apart from the state, your rental income will fall dramatically. If everybody seeks to fund their retirement by profiting from other people's rent, all sorts of perverse incentives and negative effects appear. But, more than that, are we happy to live in a society where a lot of people see their future in terms of directly profiting from others' rent? What happens if everyone wants to do that?

To explain the negative effects of rent- seeking further, imagine that in the market where everyone owns a house, once the mortgage is paid off, each household can spend the money that would have been spent in housing into the economy, save, invest and so on. And each household needs a smaller pension because its housing costs are low, so it's easier and cheaper for households to save for retirement (since the cost of living is slightly easier to predict) and the cost of providing good pensions is lower. Surplus income then gets spent in ways that benefit the economy as a whole.

But in economy B, because half of the households don't own the houses and still have to pay housing costs in retirement, less money goes into productive parts of the economy and more is diverted into benefits in order to pay the future housing costs of the non-owners in retirement. And if the non-owners have saved for their retirement, a lot of it is sucked into continued housing costs rather than being spent into the economy. Taxes increasingly go more and more towards housing the non-owners. Everyone's pensions are more expensive to save for, because they need to save more as future housing costs are less easy to predict and non-owners need to save double the amount they would have done had they expected to own a house. More and more money in the economy gets diverted into housing (which produces no growth; and actually depreciates), rather than circulating into goods, leisure, manufacturing, research, socially beneficial activities, and all of the other things we generally like about economic and social life.

Train, thank you for taking the time to explain all that!

I wanted to make a point about housing being a basic need and that profiting from peoples needs can be problematic, but you have covered it all far more comprehensively that I could ever hope to.

train thank you so much for posting that. I have never looked at the housing market in that way before. I'm a little stunned.

train what a fantastic post. thank you.

train I agree with your thinking and it is a shame that the government isn't facing up to this.

The economies of some cities in particular (in terms of the housing benefit bill) will likely be catastrophically affected, creating even more of a two nation divide. I'm thinking places like Hull, Middlesborough, Southampton, Portsmouth, which do and will have a relatively high proportion of older residents renting and without means to pay the rent, or the capacity to engage in paid work.

An interesting but sadly misinformed and wholly inaccurate opinion traininthedistance

The German housing market would be in your 'B' category yet the German economy is the strongest in Europe.

Are you an estate agent?

Germany has a very different rental market, though.

If I felt my future were less than certain, there is no way I would consider having a third child. I just can't agree that this is sensible. Your 4 and 7 year old are just about to the point where they could be in school full-time and you could get a job.

The idea of having a third child sends me into heart palpitations, not only because I don't want one but because I wouldn't want to give up my income that I'm capable of generating only because my kids are now school-aged.

We're in similar situation to the OP. Except we have 2 dc & won't be having anymore.

I'm a sahm but next year dh will be reducing his hours by a quarter so I can go back to work part time. We will be able to share childcare that way & avoid extortionate childcare costs.

I will NOT even think about becoming a childminder. I just don't have the patience.

Thanks for that explanation trainingthedistance. You have more than answered my question.

So, genuine question, if we didn't want to take part in an unfair housing situation and decided to sell the house, any advise as to what we could do with the proceeds (say £80k) to provide for us in our old age which is as 'safe' as property ownership? Should we just put it in a private pension?

We live in a capitalist economy so some people will do better than others. It's just the way it is. I've got no problem with people making money and If that is through reting properties out then so be it.

I agree that if you worry about the future financially then having additional children is maybe not the way to go.

Having enough money to live when you retire is all about making tough decisions and prioritising. I accept that for some this is not possible due to limited incomes but for many their is choice and the choice made will often have a direct impact on their future. I know someone who has no pension, an interest only mortgage and yet goes on holiday twice a year including one to Caribbean. They then can't complain when the shit hits the fan when they are older because it is their reckless decisions that will inevitably cause them problems. This couple earn around £70, 000 a year between them but will get state pensions only at probably 68 worth around £15000 per year in total. It's a big drop and they will still have their mortgage unless they take steps to repay it. They have 20 years or so left to do this but don't seem to be making any decisions to do this.

Maleview, I'm just flabbergasted @ your first paragraph, you win todays prize for being naive and simplistic

Train you are forgetting the portion of society who even though they could buy, prefer to rent.
Over the years I have rented properties out to all sorts of people from those that have a family home elsewhere in the country to those that are just testing the waters to see if they are compatible, to those that have just arrived in this part of the world and don't want to buy just yet and are just checking out which areas they would prefer to live.

Not everyone rents a property and stays in the same house for the rest of their lives. A couple of people I know added up their mortgage and travel costs and worked out if they rented their own home out and then rented something closer to town they would be better off.

If everyone owns their own home and their were no private landlords where would people live?

Also isn't food and water a need. Are you advocating that basic food should be given away for free and the water companies work for nothing to provide us with free water.

Sorry Lazysuzanne but I agree with maleview70

We do live in a capitalist society, and that brings good and bad things. Communism sounds good, but has been tried and failed.

I am certain that in your own life you use your income from whatever source for your own maximum benefit, however you perceive it.

Interested to know where exactly you think the actual principles of communism as set out in the Communist Manifesto have been "tried and failed"?

Now this could get interesting Dorothy, although rather OT. :)
I know exactly what you are getting at of course, no-one has really tried.

Unless you have an example of where it has actually been tried? And did it succeed?

Sorry Lazysuzanne but my opinion is just different than yours.

Doesn't make me naive. In fact I would say im anything but.

If I get to retirement and don't have enough money to do the things I want to do then it's down to me and me alone.

I believe in this country everyone is given the opportunity to do well and even if they don't then our level of poverty is nothing like that experienced in other countries.

I believe in this country everyone is given the opportunity to do well

You SERIOUSLY think that everybody in this country has an equally good chance to do well? It isn't much, much easier for some people to do well that others?

than others

Dorothy, yes some people find it easier than others to do well, but that's usually because their parents/grandparents have done well and passed on the results of their own efforts.
That's why we all fight to give our children the best possible start in life.

I'm not disputing the premise, ie that our economy can be defined as capitalist, my problem is the conclusion!

It does not follow that we we should just accept inequality because 'thats what happens in capitalism'

Capitalism is not one monolitic black and white structure, it doent have to be a completely free market, it can be managed in a variety of different ways.

Sure there are other countries who experience greater poverty, I'm glad I live here rather than somalia, that doesnt mean I should just accept the corruption and exploitation which exists in this country

Sure some have it easier but in my opinion the vast majority of people in this country have the opportunity to do well by educating themselves or by sheer hard work.

*Now this could get interesting Dorothy, although rather OT.
I know exactly what you are getting at of course, no-one has really tried.

Unless you have an example of where it has actually been tried? And did it succeed?*

IMO it has never actually been tried.