6 Little Luxuries Baby Boomers Could Give Up And Buy Every Millennial A House
First they came for the avocado toast. Now it is the sandwiches, nights out and family vacations.
U.K. real estate brokerage Strutt & Parker caused paroxysms of anger when it published research saying millennials could afford the deposit for a house in London if they gave up six “little luxuries”.
Giving up the likes of shop-bought sandwiches and nights out could mean a couple could save $85K over five years, it said. Then they would only need to borrow another $40K from their parents to afford the average London deposit of $124K.
Millennials are having the same problems affording homes in big cities across the world. They are frequently being told they are too extravagant and need to save more to afford a deposit, usually by members of an older generation who benefited from decades of inflation in the price of their homes, jobs for life and gold-plated pensions. Millennials actually spend less on discretionary items on average than other age groups.
So what can the older generation do to help? Instead of lecturing the young on lifestyle choices and things they can do without, the elder generation could give up the following things to aid millennials in purchasing their first homes.
Bisnow picked these six areas and did some rigorous number crunching.*
* Warning: number crunching may not actually be that rigorous.
Boomers love cars. It is not surprising; western society has been designed around them for 70 years or more. So while fewer teenagers are getting driver's licenses, older generations are carrying on spending. The average age of a car buyer is 51, according to the National Automobile Dealers Association, and 62% of car buyers are 50 or older. The average baby boomer spends almost $10K a year on car-related stuff, according to the Bureau of Labor Statistics’ Consumer Expenditure Survey, including almost $4K per person on new cars and $2K on gas. They could stop buying new or second cars and put the money toward housing for the young.
2. Eating Out
Strutt & Parker said the average couple could save around $3,500 a year if they gave up eating out for meals. But when it comes to spending on food, baby boomers come out on top, according to TD Bank’s consumer spending index, spending almost 40% more per month on eating out than any other generation. Older generations could trade in evenings at expensive restaurants sitting across from their partners of 30 years, staring silently into glasses of merlot, for fast-casual chains or delicious, cheap street food, and put the difference toward helping younger generations get a foot on the ladder.
The average millennial couple could save almost $1K a year by cutting out weekend short-haul holidays, Strutt & Parker estimated. And yet a study by the Centre for Economics and Business Research showed that in 2015 baby boomer spending on travel increased by 23%, while for younger households it dropped 5%. Spending on cruises by baby boomers is predicted to increase by 37% between 2015 and 2020. So how about older generations cut out that cruise around the Caribbean, and instead go to an all-you-can-eat buffet (the two are essentially the same thing) on-shore and put the difference toward creating more housing?
4. Pricey bikes and sportswear
We have all seen them, riding in big groups — sorry, pelotons — during the weekend on bikes that cost $5K or more, wearing brightly colored, ill-fitting cycling gear. MAMILs, middle-aged men in Lycra, are a disturbing phenomenon in most urban environments.
Sales of top-end racing bikes rose 25% in 2016 according to U.K. retailer Halfords, with middle-aged men being the biggest buyers. Cycling itself is growing in popularity as a participation sport. While Bisnow respects the rights of any generation to keep fit, how about trading in those carbon-fibre bikes for something a bit cheaper?
Basically, millennials are not going to get one so how about they get some of yours? A perfect storm in recent years has resulted in millennials not having nearly the same benefits as baby boomers when it comes to saving for retirement. Global interest rates are extremely low due to the financial crisis caused by those now in their late 30s or older, making it nearly impossible to save. Plus, with suppressed wages and a greater proportion of income spent on housing costs, millennials do not have as much disposable income as the generation that preceded them.
Companies are not so keen on jobs for life or paying into pension schemes for employees anymore, as they cannot match their pension liabilities. And baby boomers have benefited from rampant house price inflation since the mid-1990s, even when taking the 2008 crash into account.
6. NIMBYism and control of the political sphere
Ultimately the one thing older generations could give up that would help to reduce housing costs for the young is NIMBYism. The average age of those granted a new mortgage is now 38, and in the U.K. for instance, the number of young people owning their own home has plummeted in the past five years.
This situation surfaced because home construction has not kept pace with demand. In part, this is because existing homeowners hold big power in the political system. Existing homeowners do not want new homes built near them, homeowners tend to be older and older people are more likely to vote. That means accelerating the creation of new housing has not been a big vote-winner on a national or local level.
The only way millennials can do anything about this is to engage more with the political process and to make the creation of new housing a political priority by voting against those politicians or parties who do not prioritize the issue. Some individuals are starting to do this in an organized way, but it is up to all young people to stop complaining and use their vote to change the system.