Over recent years, a financial force has risen steadily through the ranks: it is now equivalent to the ninth-largest mortgage lender. But the bank of Mum and Dad’s ascent is not a story to be applauded: it testifies to the UK’s failures. Parents are expected to lend more than £6.5bn to help their children buy a first property this year, a 30% increase on 2016, according to new research.
Such loans and gifts make a small dent in the striking generational inequality that exists in large part precisely because property prices have soared. In March, a report from the social mobility commission noted that home ownership among 25- to 29-year-olds had halved since 1990, to 31%. Over a third of first-time buyers in England rely on inherited wealth, it found; at some point in the 2020s, two in five are likely to do so.
But these exchanges simultaneously entrench the social divide. Handing over cash is a stretch for many parents, and for some a real sacrifice. But many more who would love to help their children have no hope of doing so. Even scraping together a rental deposit may well be beyond them.
These divisions will become much more pronounced, as a report from Royal London has noted, because an older “grandparents” generation has accumulated property wealth and hung on to it. A “wall” of housing wealth will move through the generations, down to grandchildren, as they die. Good news for the 4.5 million whose grandparents own their properties outright; not for the rest. And the effects of these differences will be felt throughout their lives. Those who get a foot on the ladder may benefit from future price rises, perhaps trading in their home to pay for care in their old age. Those who don’t will probably face rising rents. UK landlords made £177bn from house price increases over the last parliament.
The housing crisis is so daunting in scale, and possible solutions so politically fraught, that politicians have not truly faced it. Policies tinker at the edges of the issue, and sometimes inadvertently entrench the gap: the government’s Lifetime ISA hands £1,000 a year to would-be buyers – if they already have £4,000 of their own. As is well known, the real problem is supply. Last year, the number of affordable homes built slumped to a 24-year low. The social mobility commission calls for 3 million new homes in a decade, a third of them commissioned by the public sector. Smarter homes would help too: not just for first-time but also “last-time” buyers, with the kind of accessible, attractive smaller units that might appeal to older people otherwise reluctant to downsize.
The proportion of owner-occupiers has fallen since 2003 and 37% of households rent their homes. But Labour’s shadow secretary of state for housing, John Healey, has warned that tenants have fewer rights than people buying fridge-freezers. They live in uncertainty and often in substandard accommodation. Parties have been strikingly slow to address their needs – though Ed Miliband made a stab as Labour leader – yet even the Conservatives are now paying lip service at least to them. More reasonable rents might allow some to save for a deposit, should they aspire to owning. The rest are just as deserving of decent, long-term, affordable housing. A property-owning democracy should be one in which voters have a realistic prospect of buying a home; not one in which only homeowners have a political voice.