Bank of mum and dad: Did the UK housing boom lock in privilege?

For the generation of young adults trying to stake out lives for themselves in today's economic conditions, housing has become the quiet mechanism through which advantage is inherited, according to a new report by the UK's Institute for Fiscal Studies.

The report acknowledges that while wages or education help, the ability of parents to underwrite where their children live can have a major impact on their prospects and therefore what they can earn.

Economists David Sturrock and Peter Levell insist that Britain’s long house-price boom has reshaped social mobility by strengthening the role of family wealth in determining life chances — and making it harder for those who do not have that safety net.

“Housing costs are a growing barrier to young people accessing high-productivity labour markets and...an individual’s housing, location and career choices are increasingly determined by the amount of financial support they receive from family," the report stated.

The starting point is a familiar one for those analysing the UK economy. House prices surged from the 1990s onwards, especially in London and the South East, while homeownership among young adults fell.

But the paper’s central claim is not simply that housing became less affordable. It is that rising prices turned the real estate wealth of one's parents into a decisive factor shaping where young people live, what kind of jobs they do, and how much wealth they accumulate themselves.

"Increased parental housing wealth causes larger wealth transfers to adult children... wealthier parents help their children overcome liquidity constraints to move to high house price parts of the country," said the report.

Researchers added that living in London increasingly became a privilege for those from wealthy families. In turn, this would allow offspring to have access to better jobs and make more money.

Such observations matter because wealth persistence is already high in the UK by international standards, with the country exhibiting lower-than-average transgenerational wealth and income mobility.

The report insists that the housing boom did not merely entrench inequality but also accelerated the already present transmission of advantage between generations.

Without the boom, the link between parents’ and children’s housing wealth would have been dramatically weaker, even though it is historically present in the UK.

“Having parents who have £100,000 (€115,300) more gross housing wealth causes a child to attain around £15,000 more in gross housing wealth at age 28 to 37," the report stated.

London is not just Britain’s most expensive housing market. It is, crucially, also the country's highest-earning labour market.

By easing deposit constraints through gifts or transfers, parents enable their children to access a region where wages, career progression and professional networks are strongest.

"Moving to London leads to higher earnings progression... [it is] estimated that the initial earnings increase caused by moving to London from a low-paying area to be 15%, rising to over 50% eight years later," the report explained.

It also affects the kinds of careers younger generations select, especially if moving to a more expensive city is intrinsically tied to that career.

The data shows that people from wealthier families are less likely than their more disadvantaged peers to work in science, engineering, or health jobs outside London. Meanwhile, those from wealthier backgrounds are more likely to work in creative jobs such as media, arts, design, fashion, and sports in London.

The effect is particularly pronounced for men, with parental housing wealth increasing the likelihood of entering top-earning occupations in London.

For women, the effects are more mixed, reflecting both income effects and labour-supply decisions.

"Men with a college degree who move earn on average 10% more than those who do not move, controlling for background characteristics and for college attended and subject studied. For women, the difference is 4%," the report found.

The ability to move and live in an expensive area can even affect whether a college-educated man or woman ends up moving into a high-earning category versus the middle-class one they might have grown up in.

"For men, parental wealth causes a movement away from earning in the middle of the earnings distribution. There is a 1.5 percentage points increased probability of earning above a level that defines the top 20% of earnings. This increased probability of earning at the top is almost entirely accounted for by an increase in the probability of earning at a level that puts the individual in the top 5%," it stated.

Among women, parental housing wealth does not raise the likelihood of becoming a top earner. Instead, it slightly increases the chance of leaving paid work altogether or a small shift away from mid-level earnings.