Home ownership is rising for young millennials – but the divide between rich and poor is widening

New research from the Resolution Foundation, supported by the ESRC Connecting Generations research programme, highlights rising homeownership rates among younger millennials but warns of widening inequalities between income groups. The findings, published today (20 December), show that while homeownership for 25-year-olds has increased since its low point in 2015-16, these gains are concentrated among middle- and high-income households, deepening the property divide.

The report, Housing Hurdles, reveals that homeownership rates for younger millennials born between 1991-95 have risen to 14% by age 25, marginally exceeding the 13% rate for older millennials at the same age. However, middle-income and richer households have seen the most significant improvements. For 25–34-year-olds, ownership rates in the middle third of the income distribution increased by 9 percentage points (to reach 30%) and by 6 percentage points among those in the top third of the income distribution (to reach 52%) since 2015-16, compared to just a 3 percentage point rise among the lowest third (to 13%). Richer young millennials are now four times more likely to own a home than their poorer peers, with the divide widening from 36 to 39 percentage points.

Despite these modest gains, young people today remain significantly less likely to own homes compared to previous generations, with ownership rates for 25–34-year-olds falling from a peak of 55% in 1990 to just 31% in 2022-23. Concurrently, the proportion of young people renting privately or living with their parents has surged, with poorer young people disproportionately represented among those living with parents (35%, compared to 10% of those from richer families).

The research also indicates a decline in housing costs as a share of income for young people, from 27% in 2015-16 to 22% in 2022-23. However, this reduction is uneven, with poorer families and young people in London facing continued 'housing stress'. Across the UK, one in four young people (24%) experience housing stress, rising to over half (53%) among low-income families, and two-in-five (43%) people living in London. Young renters face the highest costs, spending 31% of their income on rent, compared to 12% for mortgagors (excluding principal repayments) and 5% for outright homeowners.

Molly Broome, Economist at the Resolution Foundation and Connecting Generations member, said: “After decades of falling youth home ownership, Britain has finally turned a corner with the share of young homeowners growing consistently since the mid-2010s. However, poorer young people have largely missed out on this recovery, and the property divide among young millennials has widened as a result.

“Housing costs have also been falling recently, but the scale of the crisis that has built up means that housing stress remains rampant among young people – particularly among poorer families, Londoners and private renters. There is a still way long way to go before Britain can claim to have tackled its housing crisis, and the Government must ensure that people aren’t left behind in efforts to improve the outlook for young people.”

This research underscores the need for targeted policies to improve access to affordable housing and reduce inequalities. The Foundation says the new Government needs to build on these promising home ownership tailwinds for young people by hitting its ambitious housing targets and addressing the fact that many poorer families are missing out. Further action is needed to increase access to affordable housing and alleviate the pressure on renters by re-pegging Local Housing Allowance to the 30th percentile of local rents.

Read the full report ‘Housing Hurdles’ on the Resolution Foundation website.

Notes to Editors
• This research was supported by the Economic and Social Research Council (ESRC) as part of the ESRC Connecting Generations research programme.
• For more information contact Emma Beale.

Posted 19/12/2024 09:40