Home Ownership Is Rising For Young Millennials - But The Divide Between Rich And Poor Is Widening

20th December 2024

Youth home ownership rates have risen since the mid-2010s trough to leave younger millennials with greater home ownership rates at age 25 than older millennials had at that age. But with middle- and higher-income households gaining the most in recent years, the property divide between rich and poor young people is widening, according to new research from the Resolution Foundation published today (Friday).

The report Housing hurdles, shows that Britain's decades-long, deepening housing crisis for young people in Britain has turned a corner, with home ownership rates rising since their 2015-16 trough (of 26 per cent).

The analysis shows that younger millennials in particular are making modest gains in homeownership. As a result, people born between 1991-95 are now slightly more likely to be homeowners by age 25 (14 per cent) than those born a decade earlier (13 per cent).

However, these improving youth home ownership rates have largely benefited middle-income and richer households. Since 2015-16, home-ownership rates among 25-34-year-olds in the middle third of the income distribution increased by 9 percentage points (to reach 30 per cent) and by 6 percentage points among those in the top third of the income distribution (to reach 52 per cent) - but only by 3 percentage point for the lowest third (to 13 per cent).

As a result, rich young millennials are four times more likely to own their own home as their lower income counterparts, with the divide widening from 36 to 39 percentage points.

And despite these recent improvements, young people today remain far less likely to own their home compared to those in the early 1990s (31 per cent in 2022-23 down from a peak of 55 per cent in 1990), far more likely to rent in the private sector (up from 10 to 33 over the same period) and far more likely to live with their parents (up from 16 to 22 per cent).

The Foundation adds that young people from poorer backgrounds are far more likely to live with their parents than those from richer families (35 per cent, compared to 10 per cent).

The report also reveals that the share of income that young people (aged 25-34) spend on housing has been falling - from 27 per cent in 2015-16 to 22 per cent in 2022-23.

However, once again these falling housing costs are not being felt evenly across the country.

The Foundation finds that the share of people experiencing ‘housing stress' - spending over 30 per cent of their income on housing - remains concentrated among poorer households and young people living in London.

Across the UK as a whole, around one-in-four (24 per cent) young people experience housing stress.

However, this figure rises to more than half (53 per cent) of low-income families and over two-in-five (43 per cent) people living in London.

Young people in the private rented sector also face higher housing costs, with those privately renting spending around a third (31 per cent) of their income on rent on average, compared to just 12 per cent for mortgagors (excluding principal repayments) and 5 per cent for outright homeowners.

The Foundation says the new Government needs to quite literally build on these promising home ownership tailwinds for young people by hitting its ambitious housing targets, while also addressing the fact that many poorer 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 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."

Key findings
Young people's home ownership prospects appear to be turning a corner – younger millennials (born between 1991-95) are now slightly more likely to be homeowners by age 25 (14 per cent) than those born a decade earlier (13 per cent).

This trend coincides with the rise in home ownership across the 25-34-year-old age group, which broadly overlaps with those younger millennials today. Home ownership rates for 25-34-year-olds have increased by 6 percentage points since its low point in 2015-16 to reach 31 per cent in 2022.

The share of income 25-34-year-olds spend on housing has also fallen in recent years: the average share of income spent on housing in 2022-23 was 22 per cent, down from 27 per cent in 2015-16.

Despite these recent improvements, 25-34-year-olds today remain far less likely to own their home compared to those in the early 1990s (31 per cent in 2022-23 down from a peak of 55 per cent in 1990), far more likely to rent in the private sector (up from 10 to 33 over the same period) and far more likely to live with their parents (up from 16 to 22 per cent).

There are also stark disparities across income groups. The recent uptick in homeownership rates for 25-34-year-olds has been the largest among middle and high-income families, widening the homeownership gap between them and families on lower incomes.
Families on lower incomes also face disproportionately high housing costs in relation to income – while fewer than one-in-four (24 per cent) young families spend more than 30 per cent of their incomes on housing costs, this proportion jumps to more than half (53 per cent) among families in the lowest income quintile.

High housing costs have significant implications for the financial resilience of young families – while 25-34-year-olds have £3,000 in savings on average, this drops to only £700 for those with housing cost burdens of over 30 per cent of their income.

Higher housing costs are also associated with worse mental health among young people, with 13 per cent of 25-34-year-olds who have housing costs greater than 30 per cent of their income reporting feeling anxious, compared to 8 per cent among the total age group, and only 1 per cent for those with no housing costs.

The new Government needs to address barriers to home ownership and affordability by hitting its target of delivering 1.5 million new homes by the end of this Parliament and permanently re-link Local Housing Allowance to cover the 30th percentile of current market rents.

Read he full report HERE
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