The property divide between higher- and middle-income and lower-income households is getting bigger, research suggests.
A report by Resolution Foundation claimed that middle- and higher-income households have gained the most in terms of homeownership in recent years.
This is despite youth ownership rates having risen since the mid-2010s, leaving younger millennials with greater homeownership rates at age 25 than older millennials had at that age.
Resolution Foundation said that Britain’s decades-long and deepening housing crisis for young people in Britain has turned a corner, with homeownership rates rising since the 2015-16 low of 26%.
The analysis showed that younger millennials in particular are making modest gains in homeownership.
As a result, people born between 1991 and 1995 are now slightly more likely to be homeowners by age 25 – at 14% – than those born a decade earlier – at 13%.
How to support young landlords
Sponsored by BM Solutions
However, these improving youth homeownership rates have largely benefitted middle-income and richer households.
Homeownership rates
Since 2015-16, homeownership rates among 25-34-year-olds in the middle third of income distribution increased by nine percentage points to reach 30%.
At the same time, they climbed six percentage points among those in the top third of income distribution to reach 52%.
However, they rose by only three percentage points for the lowest third to 13%.
It means rich young millennials are four times more likely to own their own home than their lower-income counterparts, with the divide widening from 36 to 39 percentage points.
In spite of these recent improvements, young people today remain far less likely to own their home compared to those in the early 1990s – at 31% in 2022-23, down from a peak of 55% in 1990.
They are far more likely to rent in the private sector, with the figures showing this is up from 10% to 33% over the same periods, and also far more likely to live with their parents, up from 16% to 22%.
Living with parents
Resolution Foundation went on to explain that young people from lower-income backgrounds are far more likely to live with their parents than those from richer families, at 35% compared to 10%.
The report also revealed that the share of income that young people aged 25-34 spend on housing has been falling, from 27% in 2015-16 to 22% in 2022-23.
However, once again, these falling housing costs are not being felt evenly across the country.
The report went on to reveal the share of people experiencing ‘housing stress’, which it defined as spending more than 30% of their income on housing.
This remains concentrated among lower-income households and young people living in London.
Across the UK as a whole, around 24% of young people experience housing stress.
However, this figure rises to more than half – 53% – of low-income families and more than two in five – 43% – people living in London.
Young people in the private rented sector (PRS) also face higher housing costs, with those privately renting spending 31% of their income on rent on average.
It compares to just 12% for mortgage borrowers – excluding principal repayments – and 5% for outright homeowners.
Resolution Foundation said the government needs to quite literally build on these promising homeownership tailwinds for young people by hitting its ambitious housing targets, while also addressing the fact that many lower-income families are missing out.
To do this, 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.
Molly Broome, economist at the Resolution Foundation, said: “After decades of falling youth homeownership, 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 [still a] 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.”
