Will millennials ever own their own homes?

The dream of home ownership is fading for many, particularly the younger generations. Will that change? There is no relief in sight. Fewer millennials will own homes than their parents’ and grandparents’ generations. But those who do, will probably own many.

Home ownership has been falling since the early 1990s, as home prices began to increase much faster than incomes. Even if you could slave away to make mortgage payments, saving up the deposit has increasingly become the biggest challenge.

Home ownership has been falling for all age groups, but the drop is steeper for younger groups. Whether you can realise the quintessential Kiwi dream of owning a home depends on when you were born or who your parents are.

There are still many young people who can afford to buy. While a few do it because they have exceptionally good incomes, a more likely source is help from parents – the new class system in New Zealand of the landed gentry.

Parents with plenty of wealth can just give houses to their kids, but the more common way is to tap into the bank of mum and dad to help with the deposit. Many parents are also helping their kids save the deposit by letting adult children live in the family home rent-free or at a discounted rent.

If you want to buy a home in New Zealand today, you have three choices – when you were born, who your parents are and where you buy.

The generational divide in home ownership is now entrenched. Fewer of the generations who reached the home-buying stage of their life after the 1990s will own their own home. We can’t choose when we are born.

Neither can we choose our parents. Those parents who have accumulated wealth in housing can and should help their children to find the security of home ownership. Those without wealthy parents can hope to live with parents as adults, at least for a while, to save a deposit.

Many can afford to buy homes in places where they do not live. Cities, where the high paid jobs are, in general have much higher prices. But go further out into provincial New Zealand and you can buy homes for a lot less.

You may not want to move to those places to live and give up your job and career, but it can be a retirement option either to live in or to sell. The key is to make sure the rental incomes take care of running costs like mortgage payments, rates, insurance, maintenance and vacancy.

Whether or not renters choose to invest in housing elsewhere, saving and investing for retirement is critical. Without a home, New Zealand Superannuation is not enough for a comfortable life.

Those who make it onto the housing ladder will often go on to buy more properties, as it becomes easier to borrow from the bank. So, when it comes to home ownership we are likely to see increasing inequality between and within generations. Younger generations will be less likely to own homes, but those who do may own many.

To increase home ownership, we need to fix everything that is broken in our rotten housing market. It won’t happen for a while. In the meantime, we can choose to help our kids or help ourselves.

The biggest and most immediate relief from policy makers would be to make renting better for increasing numbers of lifetime renters: ramp up build-to rent with institutional investors, registration for landlords, and an accreditation system to ensure professional standards for tenancy management.

‘‘The generational divide in home ownership is now entrenched.’’