THE BLOG

The Consequences Of The Bank Of Mum And Dad Are Far Reaching And Long Term

03/05/2017 16:42 BST | Updated 03/05/2017 16:42 BST
Mark Blinch / Reuters

Yesterday we learned that the Bank of Mum and Dad is handing out as much money as the ninth biggest mortgage lender, paying out £6.5 billion helping first-time home buyers. This is hardly a surprise - getting on the housing ladder is far less affordable for young people today than it was for their parents. With an election in touching distance, we cannot forget that our nation remains in the grip of a housing crisis.

Previous generations enjoyed a heady combination of rising homeownership rate and house prices. Today 63% of all the nation's housing wealth is owned by those aged 55 and over. And over-85s hold more housing wealth than everyone under 35 years old. This unequal wealth distribution has given the debate about the housing crisis a distinctly generational slant. According to a YouGov poll commissioned by the National Housing Federation, 73% of the British public think that housing affordability issues have created a divide between younger and older generations, compared to only 8% who do not think so.

Distribution of housing wealth in Britain by age group

2017-05-03-1493821420-5304830-DistributionofhousingwealthinBritainbyagegroup.jpg Source: Wealth and Assets Survey 2012/14

While there certainly is a generational dimension to this discussion, it is important to look at the socio-economic shifts that will result from these divides, including the intergenerational transfer of wealth and the regional implications of this.

With deposits up from £30,000 to £42,000 in six years and parental contributions up 50% this year, getting help from family is now becoming the norm. While in 2008/09 around a fifth (22%) of all first-time buyers received support from their family in the form of a gift or loan to pay for their deposit, it is now a third (33%). There has also been an increase in first-time buyers who are using inherited money in order to save for a deposit, from 6% in 2008/09 to 9% five years later. But, importantly, not everyone can get help.

Use of family wealth for deposit

2017-05-03-1493821447-1002587-Usageoffamilywealthfordeposit.jpg

Source: English Housing Survey 2008/09 and 2013/14

In other words, these findings suggest that people's housing options - including where and how people live - are increasingly shaped by their family and social class backgrounds rather than just their own efforts. Given that areas with the highest house prices typically have the best job prospects this may mean that those unable to access family assistance could be deterred from moving, further entrenching existing income inequalities.

In the context of rapidly rising house prices in many parts of the country, this will not only create a divide between those who are able to buy and those who are not, but will also increase the wealth gap between these groups.

An increased reliance on the Bank of Mum and Dad is just one symptom of a broken housing market that will create deep societal divides for years to come. That is why housing must stay high on the agenda throughout this election, and why housing associations stand ready to work with the next Government to build the affordable homes the nation needs both to rent and to buy.