Rental Love

People in the UK are finding it increasingly challenging to climb onto the property ladder.

A spectre is haunting the West—the spectre of severe economic inequality. All the powers of old Europe, the United States and elsewhere have entered into a holy alliance to embrace this spectre: President and Commissioner, Powell and Bailey, German liberals and Swedish social democrats.

If one wanted to be rhetorical, this is how the distribution of wealth across the West could be described. Then there are the numbers, which are no less dramatic.

In the United Kingdom, where I live, the poorest 50% of households own just 9% of all wealth. By contrast, the richest 10% own 43%. The top 0.1%, meanwhile, doubled its share of total wealth between 1984 and 2013. These figures have undoubtedly worsened since then, most notably due to a significant wealth transfer to the rich during the COVID-19 Pandemic. 

The most concrete way wealth inequality manifests for most individuals is whether or not they own their home. People in the UK are finding it increasingly challenging to climb onto the property ladder. I was reminded of this reality by an advertisement I saw the other week on the tube. It featured a young couple hugging in their new apartment. Left of the two lovers, in white letters, reads the order of the day: “And They Call it Rental Love.” Or, in plain English: You’ll Own Nothing and be Happy.

Some 40 years ago, it took the average British couple three years to save for a deposit to buy a home. In 2023, nine years were required, rising to 15 in London. Less than a third of Londoners aged between 20 and 39 today own their home—down from over half in 1990—compared to 41% of people the same age across England.

It is crucial to understand the importance of wealth inequality because once someone has started accumulating wealth, it’s hard for those without to catch up. French economist Thomas Piketty has articulated the problem as an equation: r > g. “r” stands for returns on capital investments such as stocks and property, and “g” stands for economic growth, including pay rises.

According to Piketty’s analysis, under current policy conditions, the value of assets will rise faster than wages and other forms of pay—forever. This means, in turn, that the richest people in society will accumulate more and more wealth, leaving the rest in the dust.

For example, $100 invested in 1924 in the S&P 500, an index of the 500 biggest publicly traded companies in the US, would be worth $2.32 million in today’s money. Imagine starting with $1 million. Even if you began investing later, say in 2007, $100 would grow almost five-fold—a return handsomely beating the average growth rate in the OECD over the last 17 years.

Returning to house prices, they have increased by 339% in the UK since 2000. This spike in value risks permanently locking certain groups out of home ownership, especially those who can’t get a mortgage or are without wealthy parents; in 2019, 54% of first-time buyers got financial support from their parents, compared to around a quarter 20 years ago.

Unable to buy property, people will have lower savings due to exorbitant rents, resulting in higher levels of indebtedness, economic insecurity, poor mental health, low purchasing power and many more things detrimental to the human body and the body politic.

A sizable portion of UK households—50% in 2024—still own their home. But as r > g continues in effect, property ownership will consolidate as individuals relying mainly on wages lag behind. Of the 3 million council homes privatised via the Thatcher-introduced Right to Buy scheme, 4/10 are today owned by private landlords. After all, to capitalise on the massive increase in home prices, one needs to own at least two homes: one to live in and one to sell for profit. 

Such capital accumulation will continue while the wealthy hold all the cards. Consider the following example. In season five of the US version of The Office, the character Jim Halpert gets a mortgage and buys his parents’ house to help them retire and set up his own family for the future. Around 2009, when the events of season five took place, property ownership was still attainable for a hard-working paper salesperson.

Today, Jim cannot buy his parents’ home, given the massive increase in house prices. Yet, they still need the money from a potential sale to live comfortably in retirement. Who buys their house? The rich or their kids. Through this appropriation of the middle class, house prices keep rising and the vicious cycle continues. 

Some argue that wealth inequality—and inequality more broadly—should be tolerated because it incentivises hard work, with the distribution of wealth a result of individual grit and ability. In light of all the statistics presented here, I challenge anyone to provide evidence that the concentration of assets at the top of society is a consequence of pulling yourself up by the bootstraps. 

Global billionaires are over $3 trillion richer in 2024 than they were in 2021. Mitigating wealth inequality is not so much about redistributing resources to the middle- and working classes. It’s about stopping the flow of assets and capital to the rich. One wonders why the logic of hard work is applied to social safety nets but never to policies unfairly benefiting wealthy individuals at the expense of everyone else.

The answer is simple. Regardless of what mathematical economists want to admit, power relations exist in society. If one group owns all the assets, they can exert tremendous influence over the state, including lobbying against policies benefiting workers and reinforcing existing inequalities by privatising public goods—restricting access to those with money to pay. In the perpetual quest for shareholder value, humanity is lost in the numbers.

As a result, xenophobia and distrust in politicians are on the rise. People can sense their living standards decreasing and feel neglected by supposedly representative political institutions. This anger is being redirected by the UK’s political class and media towards anti-immigration rhetoric—a strategy that seems to be working.

Why else would Rishi Sunak feel comfortable publishing on X a grotesque video of a man in a dapper suit stamping “STOPPED” in big red lettering on papers saying: “Foreign masters student bringing family members.” “Overseas care workers bringing family dependents.” “Immigration undercutting British workers.” 

The United Kingdom is a cautionary tale for other European nations of what happens when economic inequality is left unchecked. So far, the lesson remains unlearned—wealth inequality is rapidly growing in the EU, including in my native country, Sweden.

By way of solutions, I agree with Gary Stevenson’s assertion (see also here) that the difficulties lay in convincing people to take inequality seriously. If a tax break earns you £500 per month while someone else pockets an additional £50,000, are you better off? To tackle wealth inequality is not “the politics of envy.” It’s the politics of fairness. Until then, to own a home, what matters is how much money your parents have. That is not democratic.

Tenants of the World, Unite. We have nothing to lose but our chains!

// Adrian