The cafe in Waterstones, Piccadilly Circus, is not the first place you expect to meet Britain's youth-unemployment crisis.

Huseyin Kishi is well spoken, well dressed and well read. He speaks quickly and quietly: of Les Misérables, of the case for state-funded journalism and of what would happen to George Orwell's 1984 if it were taken out of London. Kishi has been coming to this cafe for 20 months – not to buy books, but to apply for jobs.

"I love literature; it's a form of escape. I have no personal space at home. It's as though I have become a stranger in the city where I was raised. I've become shy, avoiding any occasion when somebody might ask: 'So what do you do?'"

If you were to line up Britain's unemployed youth, they would stretch from London to Edinburgh. Research by the IPPR shows that although unemployment figures have dropped in the past year, youth unemployment has continued to rise. Under-25s are now almost four times more likely to be jobless than their elders.

Huseyin Kishi: ‘I avoid any occasion when somebody might ask: “So what do you do?”’ Photograph: Martin Godwin for the Guardian

Kishi estimates that he has now applied for 540 jobs – from graduate schemes, temporary work and recruitment agencies to coffee shops, cleaning jobs, entry-level administration jobs and database work. At 25, with a 2:1 degree in politics and journalism, he is both unemployed and underemployed. "I'm a dream!" he laughs ruefully. Tomorrow he starts a new job – on a zero-hours contract. He withdrew from his last one when it left him without any work, pay or benefits for the entire month of October. This followed a one-month contract at a PR firm and a five‑month unpaid internship at a charity.

For the first time in a century, middle-class youth are set to be worse off than our parents' generation. Since the recession, the government has ringfenced pensions, the winter-fuel allowance, free TV licences and bus passes for all pensioners regardless of income. The needs of the young, meanwhile, have been ignored.

When the coalition government was elected in 2010, it immediately removed both the youth minister and the £1bn Future Jobs Fund. It replaced this with the workfare programme, which pays big businesses to make young people with no money work for free, and of course the youth contract. Nick Clegg pledged 160,000 jobs, announcing: "These are our children and they are in their hour of need." Given that it failed to provide 92% of the jobs it promised in its first year, he must think we were, well, born yesterday.

This situation affects everyone – or at least anyone concerned about climate catastrophe, economic crisis and the implications of an ageing, growing population, not to mention those who might wonder how a generation without jobs, homes and saddled with debt is going to deal with it all.

But for Liz Adnitt, this is not an economic issue; it is a mental-health issue. She has been unemployed for three years, following a nervous breakdown in June 2010. By that point, she had been working for three years as a hotel receptionist on the minimum wage. It was the only job she could find after eight months on jobseekers' allowance, so when her relationship broke down, she stayed in Manchester, living alone. She worked evenings and weekends and relied on a wage subsidised by her father.

"I was on the phone to the Samaritans while I was behind the receptionist's desk. I felt like going over to the kitchen and doing myself some harm. I couldn't cope. I got in a taxi and went home."

When Adnitt went to see her GP the next day, he signed her off sick, initially for two weeks, then for three months, then for three more. Eventually she moved on to employment and support allowance.

"It was the cumulative effect of social isolation combined with the feeling that everything I was built up to think I was capable of was a lie. I could not get rid of the sense that the things I valued most about myself – my intelligence and problem-solving skills – were of no use to anybody other than as a body to sit in a chair and be in a building, or that it might have been of value if I could only get past this wall that was the job market."

Adnitt has five A-levels and a 2:1 degree. She remembers the day she collected her results and appeared in the local newspaper as the highest-achieving student in her school. She also remembers, after graduating, the day the job centre advised her to apply for a job at McDonald's. She did, and was told that she was overqualified. She was put forward for the company's management training programme, but was then told that she lacked experience.

Adnitt is no anomaly. The Youth Index 2014, published by the Prince's Trust, estimates that 750,000 young people in the UK feel that, owing to unemployment, they cannot cope with day-to-day life. They say they have "nothing to live for".

At 29, Adnitt has moved back to Sutton Coldfield to live with her father and mother, who has Alzheimer's disease. Adnitt receives carer's allowance, but no other benefits. She looks after her mother, cares for the family cats and volunteers as a children's entertainer for a local charity. "It gives me a sense of self-worth and stops me going insane." After eight years, she says she has given up on a job or career.

Liz Adnitt: 'I wasn’t asking for my dream job. I was just asking for a job where I can pay my bills.' Photograph: David Sillitoe for the Guardian

"I wasn't asking for my dream job. I was just asking for a job where I can pay my bills without having to phone my dad up and ask: 'Please can you send me your pension?'"

As the government bids to reduce dependency on the welfare state, responsibility shifts to the family. In the past 40 years, house prices have risen so fast that if the price of milk had risen at the same rate, a pint would now set you back more than £10. In a buy-to-let economy few young adults now expect to buy, but many of us cannot afford to rent either – record numbers of under-25s now live with their parents. A generation is stagnating, unable to grow up.

So, when the family unit becomes society's safety net, what happens to young jobseekers who cannot rely on their parents for financial support or who do not have a family home to return to?

Centrepoint, the national charity for young homeless people, has to deal with this question every day. In the past four years it has helped the most vulnerable young adults cope with benefit cuts including the bedroom tax, changes to the shared room rate and the benefit cap.

"Welfare reform is having a big impact on young people, with some young people forced out of their family home due to financial pressures," says Centrepoint's chief executive Seyi Obakin. "When you combine this with a shortage of affordable homes and continuing high rates of youth unemployment, young people across the country are facing huge challenges in accessing the two things they need most to leave homelessness behind – a home and a job."

In London, rough sleeping has more than doubled since 2010. Building rates are now at their lowest since the great depression, and research by Centrepoint and Cambridge university predicts that within seven years, 150,000 young people will be unable to find a place to rent.

In this environment, the government started the new year with a resolution: to make pensions the only part of the welfare bill to be ringfenced at the next election by a "triple-lock" guarantee. As David Cameron admitted at the time: "We can only afford to do this because we are taking difficult decisions to cut the deficit." The following day George Osborne made these decisions apparent: he announced a plan to abolish housing benefit for under-25s.

Michael is 20 and uses his housing benefit to pay for his place at Centrepoint's hostel in Sunderland. He is lean, with a spontaneous smile and a tattoo on his forearm. He shakes my hand and offers to give me a tour of the hostel, where he arrived a week ago.

"I don't know how long I will be here. It depends on how I cope. It is difficult living with so many people under the same roof, but every single place is taken up. The staff are very kind, but I try to keep myself to myself."

Michael ran away from home when he was 13, following a family breakdown. He has spent most of the last seven years moving between the houses of his friends, with short periods in hostels or shared accommodation.

Michael: 'It’s absolutely crap trying to live off £113 a fortnight.' Photograph: Christopher Thomond for the Guardian

Young people on housing benefits are the exception, not the rule. More than half are parents. Thousands are ill or disabled. Many have left an abusive home or have lost their parents. They are, in short, the most vulnerable young people in the country. Even if they could return home, they may now be unable to because the bedroom tax has forced their parents to downgrade to a property where there is no room for them any more. It doesn't require a policy review to conclude, as Michael has done, that this will leave many more of his peers homeless.

Michael doesn't like living on benefits and agrees that the government should incentivise young people to work. But when there are no jobs, cutting welfare is all stick, no carrot.

"It's absolutely crap trying to live off £113 a fortnight. It does push you into looking for work, but what about people with no qualifications?"

Michael is qualified – to work on a building site – but his apprenticeship ended when his employer could no longer afford to keep him on. He applied to the aluminium company Alcan, Northumberland's biggest private employer, only to discover it had ceased to operate.

"The biggest opportunity up here is working at Nissan, but you have to fight so hard for a place," he says. "If you look around Sunderland city centre, so many local businesses are closing down. A lot of my friends have been made redundant. I travelled to Blackpool but there was no work there either."

Now, with a two-year gap on his CV, Michael is looking for training or education. "I tried to find courses I could do myself, but it affects my benefits. I wanted to do a 12-week construction course but I would have to live on £25 a fortnight. There is no way in hell I can do that."

Access to education and advice has been dramatically reduced in recent years: tuition fees have trebled, the careers service and education maintenance allowance has been axed, the student loan stock is being sold off and the funding pot for disadvantaged students is set to be halved. Local authorities have been quick to cut their youth budget; some have disposed of it altogether.

Michael has signed up to learn horticulture one day a week. "I want to find anything to take the boredom away. It's not a career I want, but it's something to do," he says.

I am surprised when Michael says he will vote at the next national election. The north-east has the highest levels of youth unemployment in the country and in 2010, the lowest turnout by under-30s at the polls – 19% lower than the national average. Faced with mounting evidence that the political system pays no attention to our needs, British youth are now the least likely to vote in Europe – which, of course, only encourages politicians to ignore us all the more.

But Centrepoint's youth parliament has responded to the cuts with a campaign. You Got a Problem?! appeals to young people to register their vote. It argues that until the voices of young people are heard, we will continue to be among the hardest hit by the cuts.

Michael agrees with the campaign. "I don't know who I will vote for, but people should vote for the people who are going to make a difference for people like me," he says.

When Cameron proposed the plan to cut housing benefits last September, he promised it would help to "nag and push and guide" young people into work, training or education. A cut to jobseekers' allowance for under-25s would also help, he said, to tempt us into this "land of opportunity". Perhaps the prime minister would like to come and look for this land from the window of a Sunderland hostel.

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