Millennials Will Spend More Than £50k on Rent by the Age of 30
According to a study conducted by the Resolution Foundation, those born between 1981 and 2000 are expected to have paid around £53,000 in rental costs but the time they reach the age of 30.
This is around £44,000 more than the average rental expenditure that would be expected to be paid by a baby boomer (someone born between 1946 and 1965) by the same age.
The information comes from the Resolution Foundation’s Intergenerational Commission’s latest report. It shows that Millennials are battling against a combination of increasing rental costs and low home ownership levels, largely down to dramatically increased house prices over recent years. Home ownership rates among members of the millennial generation are significantly lower than they were for baby boomers of the same age. At the age of 30, the Resolution Foundation showed, over 60% of baby boomers owned the home they lived in; for millennials the figure is just over 40%.
This creates a cycle by which younger generations are forced into renting for longer as they cannot afford to buy outright, and have to pay more while they do so.
According to the Resolution Foundation, this intergenerational gap in asset ownership is something that contributes towards “short-term disappointment and longer-term living standards challenges” among millennials.
Laura Gardiner, a senior policy analyst at the think tank, said: “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 report explains that with millennials, or members of generation y, having to pay a much larger portion of their disposable income in rent, they are less able to build up a savings pot than previous generations.
Further entrenching the divide is the fact that while millennials are stumping up more and more for rent each month, it is largely baby boomers who are receiving the rental income.
The report says: “millennials’ spending on housing is not only not contributing to their personal wealth in the way that housing spending by their predecessors did, but is actively boosting the wealth and assets of the baby boomers who came before them.”
According to separate government data, baby boomers make up just under 40% of the UK’s landlords, collecting half of all of the rental income in the country.
Fortunately, the report found, attitudes towards the housing crisis are changing, and for the better. While the statistics point towards baby boomers as the beneficiaries of the various asset and wealth gaps, the Resolution Foundation did find that across every identified generation, the number of those who “would support more homes being built in their local area” has more or less doubled. Among baby boomers, it has increased from 29% of respondents to 56%.
This is important, as a shortage of supply of new homes is a major factor in increasing prices.
As Gardiner explained: “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.”
New Prime Minister Theresa May has already hinted at a desire to tackle the housing crisis, in a speech made before her appointment in which she listed several inequalities currently affecting various demographics in the UK. “If you are young,” she said, “you’ll find it harder than ever to before to own your own home.” She then explained that it is her broad intention to “make sure that everyone can share in the country’s wealth.” May pointed to a gap that needs to be addressed between “a more prosperous older generation and a struggling younger generation.”
Another aspect intergenerational inequality pointed out by the report is in general income. Members of Generation Y could, the report claims, become the first generation to earn less, overall, than their predecessors.
The report shows that in their 20s, members of Generation Y earned, on average, £8,000 less than members of Generation X at the same age. Looking forwards, under the best case scenario, according to the think tank, millennials could be set to learn 7% more than the previous generation over their life time. While this is still an increase, the increase in earnings between baby boomers and Generation X is set to be around three times as large.
“Fairness between the generations is something public policy has ignored for too long. But it is rising up the agenda with the prime minister, politicians of all parties, business leaders and others rightly identifying it as a growing challenge,” said David Willets, chair of the Intergenerational Commission.