The impacts of family support on access to homeownership for young people in the UK

Sanderson, Paul (2017) The impacts of family support on access to homeownership for young people in the UK. Technical Report. Social Mobility Commission, London.

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Abstract

Executive Summary Key findings Trends in home ownership for first time buyers (FTBs) • The proportion of young people embarking on home ownership has fallen significantly in the UK over the past twenty years. • Young people are purchasing their first property later than their immediate predecessors. For example, while in 1990 39% of 20-24 year olds purchased their own homes, only just over 10% managed to do so in 2015. • Analysis of homeownership levels amongst cohorts of young people since 1990 shows that while the percentage of those owning their own homes continues to rise as they grow older, no group exceeds the level of ownership of their immediate predecessors for any given age band. • Those that do become homeowners rely increasingly on borrowing from family. Recent patterns of parental or family help with home ownership • For FTBs in England , the most popular form of financial help from family is a gift or loan from parents . 34.1% of FTBs benefited from this type of assistance. • The second most common form of help was inherited money, with 9.6% of FTBs benefitting. • For existing owners (EO) purchasing a new property, these two forms of parental help were also the most common, albeit at lower levels. 12.3% of EOs benefitted from gifts or loans while 5.2% used an inheritance. • Other forms of help included the sale of a property to a child at below market price or inheriting a property in which to live. These were insignificant though, both for EOs and FTBs. Comparing first time buyers who receive and do not receive parental help • FTBs in England receiving money or a loan from their parents could buy at a younger age than those who did not receive such help, the difference being some 2.6 years. • The equivalent age gap in London however was greater, at 4.6 years. • On average, assisted FTBs in England had lower incomes and purchased a lower priced home than those who received no assistance. • However, as a percentage of income the average mortgage payments of both assisted and unassisted FTBs were more or less the same. • While around two thirds of both assisted and unassisted FTBs were couples around a quarter of one-person households received financial assistance from their parents. • There was no significant age difference between FTBs who used inherited money to help buy a home and unassisted buyers. • Perhaps unsurprisingly the mortgage payments of the small number of FTBs who benefitted from receiving an inheritance were less than their unassisted counterparts. • FTBs who inherited a property to live in or purchased such a property from their parents were on lower incomes and were older at the time they acquired or purchased their home. Trends in parental help over the past two decades • Until recently, the proportion of FTBs in England receiving money or loans from parents had fluctuated from 20 to 30%. However, the current figure is 34.1%, an historic high. • Although lower, the latest proportion of EOs receiving financial help from parents is also at an historic high. • The proportion of FTBs inheriting money fluctuated over the past twenty years, but there has been a moderate upward trend. • The percentage of FTBs in London who receive financial help from parents has been above the 30% level for the past two decades, perhaps reflecting higher house price levels in the region compared to other regions. • The percentage of FTBs in the rest of England who received financial help from their parents rose above 30% for the first time in 2013/14, suggesting the problem of affordability has become more widespread. The impact of parental help over the past two decades • For the past twenty years, FTBs in England receiving money or loans have typically been younger than those who did not receive such parental help. • The age difference between assisted and unassisted FTBs across England ranged from one to three years over the period, and was at its lowest in the early 2000s. London had the largest age difference for assisted and unassisted FTBs, rising above three years some eight times in the past two decades in contrast to the rest of England. • The proportion of FTB couples with children is increasing, accounting for more than 50% of unassisted FTBs for the first time in 2007/08. The number of assisted FTB couples with children exceeded the number of single assisted FTBs for the first time in 2013/14. • Before the global financial crisis, assisted FTBs, on average, purchased higher priced homes than unassisted FTBs, given similar levels of income. However, this has now changed. Over the past three years assisted FTBs had lower income and bought a lower priced house than unassisted FTBs. It is not immediately clear why this should be but it may reflect a diminished appetite for risk, post financial crisis, on the part of both assisted FTBs and, importantly, the family members assisting them. Nonetheless, in general over the past two decades, there has been little difference between the mortgage payments of assisted and unassisted FTBs as a percentage of income. The projected extent of parental help over the next 25 years • In the UK, more than 30% of households with dependent children currently hold assets that could, in due course, be used towards a deposit for the purchase of a home. Although there are definitional differences, the number is broadly comparable with the latest figure (34%) for FTBs receiving parental financial assistance in England. • The percentage increases with income, but even 28.8% of households in the lower quartile income band have suitable assets. • Surprisingly, 35.9% of lone parents also hold suitable assets but this number may be misleading because it does not include lone parents who live in multiple-family households. • However, only ten percent of households without any formal educational qualifications over two successive generations are planning to assist their children with homeownership. • Numbers of future FTBs are projected to rise slightly in the short term then fall gradually over the next twenty-five years. The speed and extent of the rise and fall will be determined by the robustness of the economy. • If economic activity remains at the levels in our baseline scenario for the next twenty-five years the proportion of assisted FTBs will reach 40.6% by 2023/24 after which it is projected to gradually decline, although it will remain above 30%. • If economic activity increases, the proportion of assisted FTBs is projected to rise slightly faster, reaching a peak of 39.0% by 2021/22. Thereafter it will decline, as fewer FTBs will require assistance. By 2039/40 it will have fallen to 2005/06 levels. • If economic activity weakens, the proportion of assisted FTBs is projected to remain at current levels, around 34%, until 2024/25 and to then increase gradually to just under 40% where it will remain for the period running up to 2039/40. However, under this scenario, the absolute number of FTBs, particularly unassisted FTBs, is projected to fall furthest.

Item Type: Research Report or Working Paper (Technical Report)
Keywords: Housing, First time buyers, social mobility
Faculty: Faculty of Health, Social Care & Education (for research post September 2011)
Depositing User: Dr Paul Sanderson
Date Deposited: 24 Apr 2017 10:25
Last Modified: 24 Apr 2017 10:26
URI: http://arro.anglia.ac.uk/id/eprint/701656

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