The problem with the Bank of Mum and Dad

Originally published on March 27 on my blog for Inside Housing.

‘The Bank of Mum and Dad’ is one of those phrases that sound benign until you ask yourself what it really means.

What, after all, could be more natural than parents helping their children to buy a first home? And what could be wrong with mum and dad dipping into their pockets, or extending their mortgage, to get their son or daughter on to the housing ladder?

If we were just talking about some people being able to buy at a younger age than others, maybe not too much. But two reports out today show that the Bank of Mum and Dad is symptomatic of a much bigger problem in the housing system that is anything but benign.

The first, the one that has made all the headlines, comes from the Social Mobility Commission. It shows that the proportion of first-time buyers in England receiving money or loans from their parents has reached a historic high of 34.1%. That rate is projected to be around 40% early in the 2020s.

Parental help has always been a factor in the housing market of course but that was in an era of rising home ownership. Home ownership has been falling among young people since the early 2000s but the recent English Housing Survey showed that the ownership rate is now falling among older age groups too.

Given that housing represents by far the largest source of family wealth, that means the divide can only continue to grow between people who have home owning parents and people who do not.

And the Bank of Gran and Grandad may also be a factor. The report shows that the proportion of first-time buyers using inherited money (as opposed to parental gifts or loans) to buy rose sharply from 6% in 2009/10 to just under 10% in 2013/14.

The second report from the Children’s Society looks at children at the other end of the income scale and features the impact of an issue that it did not originally set out to research.

The longitudinal study originally excluded children who were highly mobile because it aims to trace experiences of poverty over the long term. But ‘residential transience’ was such a significant issue that it is now at the centre of the report.

One 12-year old had moved seven times within the same city and was expecting to move again soon while a nine-year-old had moved at least eight times and attended four schools. The evidence strongly suggests that unstable housing plus poverty leads to long-term negative effects for children.

Frequent moves are of course not just a problem for children living in poverty. An ever-rising number of families with children are living in insecure private tenancies with no certainty about where they will be living in six months or a year.

However, the Children’s Society highlights the fact that residential instability for poorer children may also be caused by the growing shortfall between housing benefit and rents. That shortfall will only get worse as the benefits freeze continues to bite.

As one 11-year old puts it in the report:

‘I’m just thinking why couldn’t they just let us live in one place instead of keep moving around? So it’s just, it’s just that really, it’s like, so in a few months yes 
it’ll be a bit more difficult. Whereas 
if we stay there for like two, three, four months then we have to start packing again, then we have to leave, unpack. Yes, it just keeps going like that.’

Could there be a stronger statement of the case for social housing? Or security of tenure?

Children’s future prospects have of course always depended to some extent on the housing circumstances of their parents. However, these two reports suggest the gap between owners and non-owners is likely to continue to grow.

From next month the parental bank will expand its operations via next month’s cut in inheritance tax and state contribution to the Help to Buy ISA. At the same time, 18-21 year olds who can’t live with their mum and dad will lose their automatic right to housing support under universal credit. It depends who your parents are.

The Bank of Mum and Dad is just a benign way of saying that your chances of owning a home – or maybe even just having a secure home – are increasingly dependent on family wealth.

And it’s a bank that is only open to some customers.