Chances of owning home in UK have more than halved in 20 years, Institute for Fiscal Studies says

The chances of a young adult on a middle income owning a home in the UK have more than halved in the past two decades.

New research from the Institute for Fiscal Studies shows how an explosion in house prices above income growth has increasingly robbed the younger generation of the ability to buy their own home. For 25- to 34-year-olds earning between £22,200 and £30,600 per year, home ownership fell to just 27% in 2016 from 65% two decades ago.

Middle income young adults born in the late 1980s are now no more likely than those lower down the pay scale to own their own home. Those born in the 1970s were almost as likely as their peers on higher wages to have bought their own home during young adulthood.

Andrew Hood, a senior research economist at the IFS, said: “Home ownership among young adults has collapsed over the past 20 years, particularly for those on middle incomes.”

The IFS said young adults from wealthy backgrounds are now significantly more likely than others to own their own home.



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Between 2014 and 2017 roughly 30% of 25- to 34-year-olds whose parents were in lower-skilled jobs such as delivery drivers or sales assistants owned their own home, versus 43% for the children of those in higher-skilled jobs such as lawyers and teachers.



The study shows the growing disparities between rich and poor, as well as young and old, across the country. It also illustrates the drop in home ownership over the past decade. While those on middle incomes have seen the largest fall in ownership rates, those in the top income bracket have been least affected.

The chancellor, Philip Hammond, placed helping young buyers to get on the property ladder at the heart of the November budget. This came after the Conservatives failed to win an overall majority in last year’s general election, as younger voters flocked to Labour.



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The government abolished stamp duty for the majority of first-time buyers but was widely criticised after the independent Office for Budget Responsibility warned it would push up house prices, benefiting those who already owned homes.



John Healey, the shadow housing secretary, said the report was as a “wake-up call” for the Tories. “After almost eight years of failure on housing, the government is still failing to tackle the fundamental problems with our broken housing market,” he said.



Owner-occupation rates in Britain have been steadily declining since 2003, when the proportion of people owning their home reached its peak of 71%, having risen steadily since the 1980s. Population growth, a lack of new housebuilding, the failure to replace social housing sold under right-to-buy and rising property prices since have resulted in the figure dropping to 63%.

Over the past 20 years, average house prices have grown about seven times faster than the average incomes of young adults, according to the IFS study. Average house prices have increased by 152% when taking account of inflation since 1995, though wages for 25- to 34-year-olds have only risen by 22% in real terms over the same period.



As a consequence those born in the late 1980s are much less likely to be homeowners in their late 20s than their immediate predecessors. About a quarter of those born towards the end of Margaret Thatcher’s government owned their own home at the age of 27 compared with a third born at the start of the decade and 43% of those born in the late 1970s.



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Property has become so expensive that the average first-time buyer is now 30 years old and has a salary of £41,000 a year. The IFS said that for nearly 90% of 25- to 34-year-olds, average house prices are more than four times their annual income after tax.



There have been some positive signals for young buyers in recent weeks, as fresh figures showed the number of first-time buyers increased to the highest levels since 2006, helped by slowing house price growth since the EU referendum.



Dominic Raab, housing minister, announced a £45m investment on Friday into community projects aimed at helping the building of thousands of new homes.

“Through schemes like Help to Buy, we’re helping more people onto the housing ladder and last year saw the highest number of first-time buyers in the UK since 2006,” Raab said.



“We’ve recently cut stamp duty for first-time buyers to help thousands more. But we want to go further and faster and our ambitious plan backed by targeted investment will help even more people by delivering the homes Britain needs for young families, key workers and those on low and middle incomes.”