(Bloomberg) -- The Bank of Mom and Dad is becoming a growing source of finance for UK adults looking to get on the housing ladder, according a new Resolution Foundation report.
The total value of financial gifts reached £29 billion ($36.7 billion) in 2018-2020, more than double the level a decade earlier, the research published Thursday found. That’s due to a rise in both the number and the size of gifts, which overwhelmingly come from parents to help first-time buyers put down a deposit.
Around 650,000 adults received a transfer of £10,000 or more in the two-year period, with such gifts now accounting for about 20% of the total.
“Those who aren’t lucky enough to have wealthy parents often struggle to secure a home of their own,” said Molly Broome, economist at the Resolution Foundation. “As Britain gets older and wealthier, transfers between generations are playing a greater role in shaping peoples’ economic prospects.”
The findings underscore the scale of the housing crisis confronting the new Labour government after years of rampant home-price inflation and a cost-of-living crisis. Affordability is likely to remain stretched, with the Bank of England signaling it is no rush to cut the cost of borrowing and an increase in employer payroll taxes threatening to translate into lower pay rises.
Young adults in their 30s — the age at which most buy their first home — were the main beneficiaries of parental help, the Resolution report said, with those coming from wealthier families significantly more likely to receive support.
That wealth gap between homeowners and renters is likely to be passed on to the next generation. Virtually all homeowners expect to leave an inheritance, compared to less than half of renters.
Rampant rent inflation is making it harder for young people to gather enough funds for a deposit without help from their parents. A separate report from the Resolution Foundation estimated than it would take a typical young family over 14 years to save for a deposit, almost twice as long as in the mid-1990s.
Prime Minister Keir Starmer hopes to fix the housing crisis by building 300,000 homes a year — a feat no government has achieved since Labour under Harold Wilson in 1969-70. Ministers are also trying to improve protections for tenants, for example by banning no-fault evictions. However, experts fear the proposals might end up fueling rent inflation by forcing landlords to sell up due to higher costs.
Figures from the Office for National Statistics out Wednesday showed private rental inflation picked up for the first time in seven months and hit double digits again in the capital, prolonging a cost-of-living squeeze on tenants.
High rents are encouraging more adults back into the family home to save money, according to the Resolution Foundation. Forty percent of 18 to 34-year-olds lived with their parents in 2021-22, up from 26% at the turn of the century.
This trend might be restricting young people’s mobility and limiting their jobs opportunities. Those living with their parents were more likely to be unemployed or working low-paid jobs, the report found. London was the only UK region where the reverse was true.
“These family transfers are hugely important and can be very rewarding,” Broome said. “But they are not shared equally across society.”
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