A £2.3tn windfall for those lucky enough to own their own homes during the property boom of the 1990s and early 2000s has opened up a deep and widening inequality gap between the generations, a thinktank has warned. Rising house prices that have enriched older generations have priced the young out of home ownership, said the Resolution Foundation, adding that the pattern whereby each generation was wealthier than the previous one had broken down.

In a new report, the thinktank noted that the baby boomers born in the 20 years after the second world war were the big beneficiaries of rapidly rising house prices, but had amassed most of the wealth through no skill of their own. Wealth disparities would have “worrying consequences” for the living standards of younger generations, it added.

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Laura Gardiner, senior policy analyst at the Resolution Foundation, said: “Britain’s pre-crash property boom created a huge, unearned and largely tax-free £2.3tn housing wealth windfall for those old enough and lucky enough to be home owners at the time. But while the property bubble hugely benefited many of Britain’s baby boomers, it has also driven generational wealth progress into reverse by pricing younger people out of home ownership.

“Property, pension and financial wealth can provide security and opportunities for families, as well as a decent income in retirement. The failure of younger generations to accumulate wealth in the way that earlier generations have been able to is therefore a huge living standards concern for us all.”

The report found that 82% of housing wealth increases between 1993 and 2012-14 were due to the property boom, which saw the average price of a residential property in the UK rise threefold, rather than through any active behaviour – such as buying, moving house or paying off mortgages. At the boom’s zenith in 2003, one in six of all working property-owning adults were earning more from the rising value of their homes than from their jobs.

Those born in the 1940s and 50s were the main beneficiaries of the great housing wealth windfall, since they were most likely to be homeowners at the start of the property boom, with each generation born after the mid-1950s less wealthy than the previous one. A typical adult in the second-youngest baby boomer cohort born from 1956 –60 had 7% less wealth at age 55 than the cohort at the same age five years previously.

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Between 1993 and 2012-14, the average property wealth gain for those born in the 1950s was £80,000. This was more than double the £35,000 windfall for those born in the 1970s, because the smaller percentage of those who managed to become homeowners benefited only from the later years of the housing boom.



The report found that a typical adult born from 1981 to 1985 had half as much total net wealth at age 30 than a typical adult at the same age five years before them.



The report also found that baby boomers had benefited from a second wealth windfall because they were much more likely to be the beneficiaries of defined benefit pension schemes than young generations. Fewer than one in 10 workers born in the 1980s are active members of defined benefit pension schemes, compared with nearly two-fifths of those born in the 1960s when they were at the same age.

Torsten Bell, director of the Resolution Foundation, said: “Too often our public debates ignore the huge and very unequally shared wealth of our nation. We need to better understand the scale and causes of 21st-century wealth gaps – not only between rich and poor, but between different generations – if we are to ensure we fairly address the challenges Britain faces in the years ahead. We can start by recognising that today’s young are not accumulating wealth at anything like the rate of older generations. This isn’t because they save less, but because of the bad luck of being born too late, and our collective failure on big policy areas from housing to pensions. It’s time we all took responsibility for putting that right.”

The thinktank said the government needed to take into account the “unrepeatable” property and pensions windfalls as it made plans to deal with the pressures on the public finances as the baby boomer generation retires.