The Growing Intergenerational Housing Wealth Divide: Drivers And Interactions In Australia

ABSTRACT

This paper unpacks the drivers of growing intergenerational housing wealth inequality in Australia. We also account for the multidimensional nature of housing wealth divides by examining the interaction between age and other divides. We find that the Australian intergenerational housing wealth gap widened from 161% in 1997–98 to 234% in 2017–18, favouring the older cohort. This was driven by lower rates of homeownership and lower property value growth among younger cohorts, with the relative lack of homeownership access the more significant driver. However, higher rates of couple formation and tertiary education amongst the young mitigated a further widening of the gap. The intergenerational housing wealth gap is exacerbated within specific population subgroups. The growing housing wealth gap between the income-poor young and income-rich old has been particularly alarming, climbing from 532% to 1230% over two decades. We discuss implications for policies seeking to alleviate intergenerational tensions in housing markets.

KEYWORDS:

• Housing
• wealth
• inequality
• intergenerational
• homeownership

Acknowledgments

Rachel Ong ViforJ is the recipient of an ARC Future Fellowship (project FT200100422) funded by the Australian Government. This paper uses unit record data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey. The HILDA Project was initiated and is funded by the Australian Government Department of Social Services (DSS) and is managed by the Melbourne Institute of Applied Economic and Social Research (Melbourne Institute). The findings and views reported in this paper, however, are those of the authors and should not be attributed to the Australian Government, ARC, DSS or the Melbourne Institute.

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Supplementary Material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/14036096.2022.2161622

Notes

1. The SIH do not contain information to calculate property wealth for rental investment properties and second homes, and so our analysis is restricted to the principal place of residence.

2. Self-reported values are widely used in the analyses of housing wealth distributions in the international literature. Nonetheless, self-reported values may deviate from actual values, distorting the true housing wealth gap estimate. A review of the literature suggests that mis-estimation by homeowners is on average smaller in Australia than various other countries. Moreover, older owners are generally less optimistic about their house values than younger owners, suggesting that the intergenerational housing wealth gaps in this paper are more likely to be under-estimated than over-estimated. We discuss this literature in section S1 of the supplemental online material.

3. Authors’ own population weighted of calculations of household wealth using the 2005–06 and 2017–18 releases of the SIH. The former is the earliest release for which it is possible to calculate non-property wealth. The age of the household reference person is used to allocate a household into the young cohort (aged 30–39). Unlike measures of primary home wealth used elsewhere in the paper, other types of wealth could not be computed at an income unit level. However, in 2017–18, the vast majority (92%) of households in the young cohort consisted of a single income unit. Therefore, we exclude the small number of young households with multiple income units.

Additional information

Funding

This work was supported by the Australian Research Council [FT200100422].