Moaning Millennials get the greatest cash windfall in history

Nearly half of Britain’s £10 trillion in housing wealth is owned by over 65s. Guess who’ll inherit it?

Photo by Christopher Bill on Unsplash

Now here’s an odd thing. The house price crash doesn’t seem to be creating a panic this time round. It is happening - no doubt about that. Interest rates and therefore mortgage rates have rocketed. Houses that were just unaffordable are now looking extra-terrestrial at 9 times average earnings. We have a unique combination: recession, inflation, an energy crisis and war in Europe. This toxic brew should be heralding a collapse in house prices and panic in the streets. It’s not happening. Why?

Well for one thing there’s a lot fewer mortgages. Out of 27 million dwellings in the UK fewer than 7 million have a mortgage. The rest are either owned outright, around 9 million, or rented. People who are mortgage free don’t care so much about house prices. Indeed, for many of them, being older and with savings to protect, an increase in interest rates is rather welcome.

Moreover, most of those younger home owners have fixed mortgages that don’t change with interest rates. Only about 2 million or so are likely to have to increase payments in the next couple of years. This is still a problem, of course but perhaps less serious than in the early 90s or after the 2008 financial crash when many more had floating rates that automatically rose with the  bank rate.

Much more of a problem is the astonishing increase in rent costs. This is hitting younger people especially hard. Millennials have in many cases been priced out of property ownership altogether. A shortage of houses to rent is pushing rents up. The Scottish government’s attempts to freeze rents is pushing a lot of smaller landlords out of the market. Tax changes since 2015 have brought a halt to the buy-to-let boom.

But even here the howls of anguish from Millennial rent victims seem to be somewhat muted. And I think I might have discovered why.  Many of the under 40s who have been justifiably angry about not being able to afford a house in London, or just about anywhere, are about to join the property owning democracy themselves.

Remember that Labour Party video during the 2017 general election campaign showing smug older home owners sneering at the young? Well the “priced out” generation are starting to realise that they’re about to join the smug set. This is because Millennials are about to inherit the biggest inter-generational wealth bonus in history as the post war “baby boom” generation dies off and they inherit the accumulated housing wealth.  This is a lot of wealth.

Total hosing wealth in the UK has risen to over £10 trillion according to Zoopla - yes £10,000,000,000,000 as of 2021.  Nearly half UK properties are owned by the over 65s.  This means that between four and five trillion pounds is likely to be inherited by their children in the not too distant future.  To get a handle on the scale of this wealth transfer, it is around twice the entire UK national debt. Indeed the national debt doesn’t really exist now except in the imagination of the Debt Management Office at the Treasury.

So all those Millennials tweeting about how hard done by they are living in grotty overpriced flats are about to inherit the greatest windfall in history. Some of them are already beginning to become uneasy about this.  Others are shifting nervously when people talk about increasing inheritance tax or wealth taxes. 

Many left wing activists - the mouthy ones on Twitter - are middle class university graduates who are already benefiting from an estimated £10bn a year from the bank of mum and dad.  This allows them to get their foot on the lower rungs of the media and tech career ladders, which often require them to live in London and have private means. If this important dimension of class inequality somehow escapes media attention, it could be because the media is run by these people.

The transfers of wealth outstrip any racial or gender dimension to inequality. The ethnicity pay gap has narrowed to a mere 2% according to the ONS.  Women have had equal pay for equal work by law since 1975. But what might be called the inheritance gap is wider than ever - unimaginably so. 40% of the population don’t have any housing wealth at all. They live in rented homes that have not become wealth stores. They inherit zilch.

The home ownership divide is becoming the greatest engine of avoidable social inequality.  It has been largely created by the Bank of England’s policy of near zero interest rates since 2009 which has fuelled asset price inflation. But don’t expect anticapitalist campaigners to start gluing themselves to the steps of the Bank of England. The greatest wealth grab in history is sill below the radar and likely to remain so for some time.

In the longer term, inheritance taxes must surely be reviewed. At the moment you can bequeath around  £1million tax free to family members if you arrange it properly. Future governments will have to do something to rein back on this wealth transfer machine which results purely from accident of birth. Sons and daughters of UK home owners (not all of them middle class) are about to inherit life-altering sums of money. An entire generation winning the pools. For doing absolutely nothing at all.