The combination of declining homeownership and rising costs in the private rental sector mean that today’s generation rent will have spent £44,000 more on renting by the time they reach 30 than baby boomers, according to new research by the Resolution Foundation.
The analysis, published ahead of yesterday’s launch of the Resolution Foundation’s Intergenerational Commission, highlights a worrying drop in homeownership over recent decades, which has reduced living standards for the millennial generation and led to a further concentration of wealth among the older generation.
The study found that baby boomers – those born between 1946-1965 – were the main beneficiaries of the growth of homeownership during the 20th century, with almost two-thirds (63%) owning their own home by the age of 30. However, decades of falling housebuilding and rising house prices have reduced homeownership levels for subsequent generations.
About 60% of generation X owned their own home by the age of 30, falling to 42% for today’s millennial generation.
This shift away from homeownership has left many more millennials renting privately, which has subsequently caused a sharp rise in the cost of renting. The Resolution Foundation found that millennials have spent almost twice as much on rent as generation X did at the same age, who in turn spent twice as much as the baby boomers.
Generation Rent has Spent £44,000 More on Rent than Baby Boomers
Combining the downward shift in homeownership with the rising cost of renting, the report shows that millennials have spent £44,000 more on rent than baby boomers by the time they reach 30, and £25,000 more than generation X.
The Resolution Foundation says that the extra spending on rent has reduced living standards for today’s young people and made it harder to save for a deposit for their own home. It adds that the extra spending on rent is more than the average first time buyer deposit, of £33,000.
With half of all residential rental income landing in the pockets of baby boomers, the organisation says that the growth of generation rent is a key reason why questions of intergeneration fairness are rising nationally.
The Resolution Foundation welcomes Theresa May’s acknowledgement of Britain’s housing deficit in a speech last week, where she said that unless action is taken, “young people will find it even harder to afford their own home”.
The group says that a major housebuilding scheme is likely to be supported by all generations, contrary to popular belief, pointing to findings in the British Social Attitudes Survey, which found that baby boomers’ support for homes being built in their local area has almost doubled in recent years, from 29% in 2010 to 56% in 2014.
The Resolution Foundation report was published ahead of the launch of its Intergeneration Commission, an 18-month investigation that hopes to repair the fractured social contract between generations. It will consider the extent to which the living standards of generation rent have been permanently scarred, and recommend policies to raise the living standards of current and future generations.
The Senior Policy Analyst at the Resolution Foundation, Laura Gardiner, explains: “The nation’s housing crisis is perhaps the most visible example of growing inequality between generations.
“Young people today are paying a heavy price for decades of falling homeownership. The struggle to get on the housing ladder has left many of today’s millennials renting, at a time when it has become more expensive to do so. Millennials have had to spend £44,000 more on rent by the time they reach 30 compared to the baby boomers.”
She continues: “Britain’s continuing failure to build enough homes means that unless we change course, the struggle of young people to own their home is only going to get worse.
“The good news is that older generations are just as concerned about young people’s struggle to own their home, and support for housebuilding is growing across all age groups. A sustained programme of housebuilding to cut Britain’s housing deficit would send out a clear message from the incoming Prime Minister that she is committed to repairing the social contract between generations.”
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