I don't think owning things in general creates wealth. Making smart financial decisions does.
It's difficult to defend that kind of position when the only viable choices available range from bad to worse. By any rational standard, as someone a little older than the Millenials described in this article, I should be well off -- degree from a good university, work in tech industry, run my own small business these days, etc. -- and yet I have essentially no chance of buying a viable long-term family home in the city where I live.
It doesn't make a lot of difference how carefully I save or how hard I work to grow the company revenues, because we simply don't have enough houses to go around. That means the property bubble just keeps on growing, and those of my parents' generation who bought their first home multiple decades ago are now buying up the new ones as well, to use as investments and let out as rentals. They can make more money doing that than all but the most successful and fast-growing business can generate or the very highest paid jobs will pay, and it's effectively passive income most of the time, so the cycle continues with the gap widening by the day.
The next generation are even worse off, with pressure to have a degree to get just about any kind of job these days leaving them with tens of thousands in student debts before they even start their first job and in most cases doomed to spend much of their 20s just trying to keep up.
That's a fair statement. I should have stated my original position being that making smart financial decisions creates wealth more than simply owning things. Obviously access to education, capital, laws that favor certain classes of people, and just plain luck all influence one's ability to create wealth.
That being said, the smart financial decision, in your position, might be to relocate to a different city with significantly cheaper housing, education, food, etc. That has the social/emotional downside of not being as near to friends, family or the things that you like in your city, which may not be it worth it to you.
If a lot of people want to live in a certain area, and there is limited space to construct housing (or laws that prohibit new construction) its hard to see how prices would be able to stay low.
What do you think the best solution to this problem would be? In my mind, the biggest problem is that we have laws that favor bigger companies and richer people and provider an unfair advantage to those people. (some big companies pay no income tax for example, where that's not an option for a smaller businesses, or small businesses or poorer people can't defend themselves in civil cases due to excessive legal costs)
That being said, the smart financial decision, in your position, might be to relocate to a different city with significantly cheaper housing, education, food, etc. That has the social/emotional downside of not being as near to friends, family or the things that you like in your city, which may not be it worth it to you.
One difficulty with this is that moving somewhere cheaper often also means moving somewhere that work is harder to find and/or doesn't pay as well, so you can easily find that your gains are mostly cancelled out and you're just saving up even more slowly relative to more expensive areas with better paid work.
In any case, as you say, it's just not worth it to me to move somewhere far from the region where most of my family and friends live, my hobbies are well catered for, and work/schools/other practical facilities are readily available.
What do you think the best solution to this problem would be?
Build more houses -- lots and lots more houses. It's really as simple as that.
Here in the UK at present, we build very roughly half as many houses per year as most credible commentators reckon we need to support demand, and we have been underdeveloping for decades now. There is no need for artificial "help to buy" schemes, punitive taxes on landlords or holiday home owners or people with large homes, or any of that other complicated economic stuff the great and powerful keep talking about. Just build enough houses for everyone to find somewhere to live and the rest will take care of itself.
In reality, this means fixing our horrendously broken and onerous planning system. Right now, private individuals are up against a barrage of complexity and ambiguity if they want to build/extend themselves, so most new homes are built as part of large-scale commercial developments. Those developments typically receive planning consent on the basis of having a certain proportion of so-called affordable housing -- itself something of a joke in a city like mine, because no teacher or nurse or office junior can actually afford even an entry-level place -- but then the developers have a whole box of tricks for managing to build/sell the high-end, expensive, more profitable homes first and somehow a lot of the affordable ones never quite seem to get built.
I have trouble believing this without more detail. I'm an older millennial and have a very similar situation to what you're describing (good university, tech industry, run my own business), but I can say with great confidence that I can buy a house.
In fact, I own a condominium already which I lease for passive income. I've also invested heavily into some other real estate holdings. I do this while paying off student loans, saving for a wedding, and starting a startup where I made very little for over half a year (1.5 years ago). Perhaps, I stumbled upon some large sums of money without realizing it but I also know I don't buy any video games, I don't go to concerts, I don't go on lavish vacations, I don't buy coffee in the morning or really party on the weekends. I challenge myself to spend where it's necessary and on very few indulgences, though obviously I do every once and awhile. I cook at home, I refrain from feeling obligated to have a drink in my hand when out, and I take vacations to see my family via middle of the night trains.
The average software engineering salary is easily into the 6 figures but there are people doing well making half of that. I don't buy that you have this oppressive force dragging you down and I would be inclined to say that most people in my generation and onward think $40 bottomless brunches, multiple $15 cocktails on the weekend, a week long vacation to the Bahamas, etc. are normal, in the same way people think that a college degree guarantees a job. The harsh reality is that Millennials take too much for granted and life has always required people to make sacrifices.
I don't know your particular situation, but head over to http://www.reddit.com/r/personalfinance and you'll probably discover a few changes you could make to your lifestyle.
You appear to be assuming that I live in the US and that I spend frivolously. Both assumptions are incorrect.
In fact, I live in Cambridge, UK, where we're comfortably in the London commuter belt and have many nice new million pound flats for sale. On the other hand, if you're a nurse working at the local hospital and you want to raise your kids in your own house, you can expect to live far outside the city with a substantial commute into work. Because, you know, we don't overwork and underpay our medical practitioners already in this country!
I do know people around my age who have managed to buy in the city itself, but almost all of them had an unusual source of serious money for someone our age, and often for an unfortunate reason (big inheritance that arrived a lot earlier than expected, compensation lawsuit, that kind of thing). A few bought very young and got lucky to be on the ladder before prices got really crazy, though for every one of those I probably know someone else whose financial development was set back a decade after finding themselves in negative equity too early in their careers to cope with it. In any case, the latter was never an option for people a decade younger who are in the middle of that Millennial bracket and might traditionally have been buying their own place by that stage of their lives.
For "normal" people (and remember there's quite a high upper bound on what I'm calling "normal" in this discussion) looking for a normal family house because they've had a new baby or relocated to change jobs or have an elderly relative moving in, the reality here is that by the time they have got home from work, seen a nice place in the listings, and called the estate agent to arrange a viewing, the property has often already been sold. The better-looking properties are currently being bought literally within minutes of being available and without the purchaser even visiting them, such is the confidence in the market that the property can be sold at a substantial profit in a few months even if it turns out to have problems on closer inspection. Sealed bids is becoming a popular sale method, and winning bids on £400-500K family homes are coming in £100K+ over. No normal person can compete with professionals who have the time and resources to play the game by those rules.
It's difficult to defend that kind of position when the only viable choices available range from bad to worse. By any rational standard, as someone a little older than the Millenials described in this article, I should be well off -- degree from a good university, work in tech industry, run my own small business these days, etc. -- and yet I have essentially no chance of buying a viable long-term family home in the city where I live.
It doesn't make a lot of difference how carefully I save or how hard I work to grow the company revenues, because we simply don't have enough houses to go around. That means the property bubble just keeps on growing, and those of my parents' generation who bought their first home multiple decades ago are now buying up the new ones as well, to use as investments and let out as rentals. They can make more money doing that than all but the most successful and fast-growing business can generate or the very highest paid jobs will pay, and it's effectively passive income most of the time, so the cycle continues with the gap widening by the day.
The next generation are even worse off, with pressure to have a degree to get just about any kind of job these days leaving them with tens of thousands in student debts before they even start their first job and in most cases doomed to spend much of their 20s just trying to keep up.