London incomes were hit harder than for any region in Great Britain in the aftermath of the financial crisis and recession, once the capital’s lofty housing costs are considered.
Real median incomes dropped by around four per cent in London between 2007-08 to 2009-10 and 2010-11 to 2012-13, roughly in line with the UK average, according to research released this morning by the Institute for Fiscal Studies (IFS), and funded by the Joseph Rowntree Foundation.
But once housing costs are taken into account, median incomes in the city have plunged by eight per cent over the timeframe – far more than the national average and outstripped only by Northern Ireland.
Mortgage costs fell less steeply in London than in other parts of the country. The capital is the only UK region in which mean housing costs fell by less than ten per cent over the same period.
The same is true for measures of income poverty and material depravation – London has the highest rates once housing costs are taken into account.
The IFS also finds that 22-30 year-olds were hardest hit by the changes between 2007 and 2013. Median household incomes dropped by 13 per cent for the group, as opposed to seven per cent for 31-59 year-olds and not at all for over-60s.
“Pay, employment and incomes have all been hit hardest for those in their 20s. A crucial question is whether this difficult start will do lasting damage to their employment and earnings,” said Jonathan Cribb of the IFS.
Despite the fact that low interest rates have been more likely to help young home owners with more debt, the proportion of people who own a house has halved in a generation. Just 21 per cent of those born in the mid-1980s owned a house at the age of 25, compared to 45 per cent of those born in the mid-1960s.