First-time buyers have never been more dependent on the ‘Bank of Mum and Dad’ or inheriting money, a government-backed commission on social mobility has found, as it warns inequality will widen.
New research by the Social Mobility Commission says the increasing trend is making it almost impossible for young people on low incomes to buy a home.
In a blog for Huffington Post UK, former Labour Cabinet Minister Alan Milburn, chair of the Commission, warns home ownership is becoming a “distant dream” for millions and warns of “treadmill families” who are “working hard to get on but going nowhere”.
An analysis of official data by the University of Cambridge and Anglia Ruskin University found over a third of people in England (34 per cent) are relying on family for a financial gift or loan to help them buy their first home.
This compares to one in five (20 per cent) just seven years ago. A further one in ten rely on inherited wealth.
The growing gulf between rising house prices and stagnant wages has led to home ownership among 25-to-29 year-olds to fall by more than half in the last 25 years, from 63 per cent in 1990 to 31 per cent most today.
The disparity is also forcing those looking to move up the property ladder to look for a family hand-out, with 12 per cent of existing owners benefitting from a gift or a loan when buying a new home.
The Social Mobility Commission warns difficulties in buying homes are a major hurdle to improving social mobility in the UK.
Around a third (30 per cent) of households with dependent children hold assets that could be used towards a deposit to buy a home.
But around only 10 per cent of households without any formal educational qualifications over two successive generations feel able to assist their children with buying a home, the report finds.
Without family financial help, first-time buyers are having to wait on average 2.6 years longer to acquire a home. In London, the gap rises to 4.6 years.
Researchers project that the number of future first time buyers will fall gradually over the next 25 years depending on the strength of the economy. Milburn said:
“Home ownership helps unlock high levels of social mobility but it is in free-fall among young families. Owning a home is becoming a distant dream for millions of young people on low incomes who do not have the luxury of relying on the ‘Bank of Mum and Dad’ to give them a foot up on the housing ladder.
“The way the housing market is operating is exacerbating inequality and impeding social mobility. It is welcome that the Government recognises the growing problem people face in getting on the housing ladder. A major national effort is needed to expand opportunities for home ownership and will require more radical action on housing supply.”
The Commission has recommended that the Government should target building millions more homes over the next decade, led by the public sector, and allow some green belt land to be given over to the ambitious drive.
It also wants the Starter Home initiative, where homes are sold at a discount, to be expanded to help average income earners.
The Commission also calls for tax cuts to encourage longer private sector tenancies.
The report’s lead author, Dr Paul Sanderson, from Anglia Ruskin University, said:
“Over the past few decades, pressure on housing affordability has been increasing, leading to a significant decrease in the proportion of young people entering home ownership. Those who do manage to become first-time buyers, tend to do so at a later age than the previous generation.
“Affordability problems mean that parents and other family members have a critical role in assisting their children to buy their first home, either by means of a gift of money or a soft loan. The latest proportion of first time buyers fortunate enough to have families who can provide this sort of help has reached an historic high of 34 per cent.
“Going forward, the gap is likely to continue between those in the UK who can acquire that most significant of financial assets, the family home, and those who cannot. Only better-off young people and those who have parents who have already accumulated housing wealth are likely to be able to consider home-ownership without radical changes to the housing market.”