Wealthy parents are key to home ownership – not your earnings
When it comes to the prospect of youngsters owning a home, parental wealth is now almost as important as how much they earn, according to the Resolution Foundation.
Its report found that in the mid-1990s and early 2000s, home ownership rates for 30-year olds with parental property wealth were twice that of young people whose parents did not own a home.
This gap has since grown so that recent home ownership rates for 30 year olds with parental property wealth are almost three times that of those without parental property wealth.
As well as greater home ownership, young people with high levels of parental wealth are 74% more likely to have a degree than those without parental wealth, and typically earn over £500 more per month. Both of these factors increase chances of home ownership.
However the report shows that, even after accounting for these education and pay benefits, access to the Bank of Mum and Dad is independently driving up young people’s home ownership.
The think tank said having a society where young people’s housing aspirations are so dependent on what their parents own is “undesirable”, and emphasised the need for politicians that say they want a socially mobile country to focus on wealth not just income.
While building more homes will help, the report notes that policy makers will need to be more radical if they want to see real change, with high house prices also being driven by long term declines in interest rates that are unlikely to be reversed anytime soon.
Stephen Clarke, senior economic analyst at the Resolution Foundation, said:“High house prices and sluggish wage growth have meant that being able to buy a home of their own is almost impossible for many young people without access to the Bank of Mum and Dad.
“In fact, our housing crisis is so big that what your parents own is becoming as important as how much you earn when it comes to owning your own home. This is particularly worrying for the one in two millennials who aren’t homeowners, and whose parents also aren’t either.
“These findings reinforce the need to think more broadly about what the barriers to social mobility are in 21st century Britain. We’ve always known that who your parents are affects what education you get and job you do. But increasingly the effect is continuing later into life by determining whether you are able to own a home of your own.”