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Parents, prices and young adults' homeownership

How do parental background and local house prices influence young adults’ homeownership in England and Wales?

Successive British governments have expressed a commitment to improving social mobility and increasing homeownership. However, declining rates of homeownership amongst young people – attributed in part to the financial constraints imposed by high house prices and hefty mortgage deposit requirements – now threaten both of these objectives and raise the spectre of deepening housing inequality.

 

Debates about Generation Rent suggest that the age distribution of housing resources is becoming more unequal as young adults are finding it harder than previous generations to ‘get on the housing ladder’. Moreover, the growing financial difficulty of accessing homeownership could be deepening housing disparities between young people by lifting owner-occupation out of reach of those whose parents cannot afford to provide housing assistance (for example through gifts or mortgage guarantees, help with big ticket purchases or free/subsidised accommodation). This could strengthen the intergenerational transmission of wealth and (dis)advantage, especially in places where house prices are high and it is particularly difficult to enter homeownership.

 

To examine these issues, in a recent piece of work I enriched the Office for National Statistics Longitudinal Study of England and Wales with new data on average transactional house prices within Local Authority Districts. I then modelled how parental attributes predicted the probability that young people aged 25-34 in 2011 were homeowners, exploring whether these patterns varied with local house prices.

 

There were two principal findings:

 

1. Children with more socio-economically advantaged parents are disproportionately likely to become homeowners, even after taking into account that young people from different backgrounds often lead very different types of lives (for example in terms of educational attainments or employment patterns). Disparities in the odds of homeownership between children from more and less advantaged backgrounds are also somewhat more pronounced in areas with higher house prices where fewer young people are owner-occupiers.

 

2. Nevertheless, individual factors like qualifications, family type and employment are generally more potent predictors of young adults’ homeownership than parental background or local house prices. Parental factors and local prices also only strongly stratify the homeownership prospects of those more advantaged young people whose life trajectories are conducive to owning. Less advantaged young people are unlikely to become homeowners regardless of local prices or the socio-economic status of their parents. This means that housing policy interventions such as Help to Buy are unlikely to create a more socially mobile housing system unless the intergenerational transmission of (dis)advantage in other areas - such as the education system and labour market - is also addressed.

 

Going forward, this work indicates that improving the housing experiences of less advantaged young people requires policy-makers to look beyond social mobility and ownership oriented initiatives. As many young people are prolonging their education and grappling with student debts and a lack of secure well-paid work, interventions to improve young adults’ everyday quality of life need to also target the rental sector. This is important because a lack of social housing means that the growing number of young people who cannot or do not want to enter homeownership currently have to remain in the parental home or rely on weakly regulated private rental accommodation that is often relatively more costly, less secure and of poorer quality than housing in other tenures.

 

30/09/16