Housing market made unfair by “bank of mum and dad”
First-time buyers relying on family loans to fund deposits could be aggravating inequality.
A study backed by the government from the Social Mobility Commission revealed that the percentage of first-time buyers looking to their families for financial help had grown from 20% in 2010, to 34%.
The findings also revealed that for those aged 25 to 29, 31% owned a home compared with 63% in 1990.
Commenting on the figures from the study was Alan Milburn. The former Labour MP and the chair of the commission stated: “Home ownership helps unlock high levels of social mobility but it is in freefall 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.”
Based on data from the Anglia Ruskin University and the University of Cambridge, the report analysed a series of surveys including the English Housing Survey. This took information from around 13,300 homes during 2013 – 2014. Similarly included was the Labour Force Survey conducted between 1995 and 2015 which looked at homeowners by age.
The report also found that one out of ten people trying to get onto the housing ladder used wealth that they inherited. 12%, regardless of whether they were buying for the first time or not, were using a “gift or loan”.
Those who were buying for the first time and received cash or a loan from their parents were able to purchase a home up to 2.6 years earlier. In London, this figure grows to 4.6 years.
The study also indicated that for homes with dependent children, 30% had assets which could be put towards a deposit for a home. However, for homes where there had been an absence of formal qualifications for two consecutive generations, only around 10% felt they could help their children.
Figures from the report also indicate that should the economy weaken, the proportion of first-time buyers being supported by their families will continue to be at around one-third until 2025. This figure is then expected to grow to around 40% by 2029.
The lead author of the report, Dr Paul Sanderson stated that owning a home was only likely to be considered by young people who were “better off” and had parents who had accumulated housing wealth. This would continue to be the case unless there were “radical changes to the housing market.”
The Anglia Ruskin senior lecturer and University of Cambridge fellow went on to state that “It is further embedding social immobility into the housing market”.
“Obviously it’s down to affordability, increasing housing prices and incomes staying static compared to inflation.”
He also mentioned that a rise in social house building, planning development regulation and a shift towards the help-to-buy scheme could improve the current situation.