Another graduation season, another cohort of bright-eyed twenty-somethings discovering that the only thing softer than the labour market is the housing market. A new report from the Centre for Cities confirms what many already know: a growing number of graduates are moving back in with their parents after university, not because they want to, but because they cannot afford to do otherwise. The report highlights the government’s latest housing reforms, but let us be honest: these are sticking plasters on a haemorrhage.
The headline reform is the extension of the ‘First Homes’ scheme, offering 30% discounts to key workers and local residents. Discounts sound nice, but they do not address the fundamental imbalance between supply and demand. Since 2000, real house prices have risen by 150%, while wages have barely kept pace with inflation. The result is a generation trapped in a rental cycle, or worse, living in their childhood bedroom. The yield on a 2-year gilt currently sits at 4.5%, reflecting the market’s expectation that interest rates will stay high. That means mortgage costs remain punitive, further strangling demand among first-time buyers.
The government likes to talk about ‘affordable housing’ as if it were a magic wand. In reality, ‘affordable’ often means ‘still too expensive for the median earner’. The new reforms include a ‘Mortgage Guarantee Scheme’ to help buyers with small deposits. But here’s the rub: a small deposit in London on a £400,000 flat still requires £20,000 up front. For a graduate starting on £28,000, that is a staggering sum after rent, student loan repayments, and the cost of living crisis. The capital is fleeing to the rental market, driving up yields for landlords but squeezing tenants.
What the report does not say is that the housing market is a classic case of policy failure. The UK builds fewer homes per capita than almost any other developed country. Planning permission is a bureaucratic maze, and local councils have little incentive to approve new developments. The result is a scarcity premium that has turned housing into a speculative asset rather than a place to live. Overseas investors, particularly from Asia and the Middle East, have parked billions in London property, driving up prices further. This is capital flight into bricks and mortar, but it is a flight that excludes the young.
The reforms also include a ‘Renters’ Reform Bill’ to abolish no-fault evictions. That is welcome, but it does nothing to increase supply. Landlords are already exiting the market due to higher mortgage costs and tax changes, reducing the rental pool. This is a market disequilibrium: demand outstrips supply, and prices go up. Simple economics, but the government seems intent on regulating its way out of a supply crisis.
So what is the bottom line? The graduate returning home is a symptom of a deeper malady. The housing market is broken because we have allowed it to become a casino for the wealthy. The reforms are tinkering at the edges. If the government were serious about affordability, it would slash planning red tape, build on the green belt, and tax empty properties heavily. But that would require political courage. Instead, we get press releases and pilot schemes.
In the meantime, the graduate will endure the indignity of parental curfews and the commute from the suburbs. The housing market will continue to absorb cash like a sponge. And the Bank of England will keep rates high to combat inflation, ensuring that the dream of homeownership remains just that: a dream. Welcome home, graduate. Your country has failed you.









