Young adults left the family home, rented for a few years, bought a home, and gradually paid off their mortgage. This “Great Australian Dream” came to shape how many Australians thought about adulthood, financial security, and the future.

This has changed. Australians are renting for longer, relying more heavily on the “bank of mum and dad”, or never entering homeownership at all.

Price is one obvious factor. As a recent Sydney Morning Herald feature story showed, if prices had simply kept pace with inflation since 1996, the median house price in Sydney today would be about A$465,000. Instead, it’s now $1.79 million.

Our recent research shows housing pathways are shaped long before someone buys their first home. Family resources and labour market opportunities strongly influence who is able to follow pathways into homeownership and who remains in long-term renting.

We also found that almost half of young people followed much more disrupted housing pathways, moving repeatedly between renting, homeownership, and, in some cases, back to the family home.

Following young Australians for a generation

Our research used 19 years of Australian data from the long-running Household, Income and Labour Dynamics in Australia (HILDA) survey to follow the same people over many years to understand their housing trajectories: the pathways they take through the housing system over time.

Instead of asking only who owns a home today, this approach gives us a clearer picture of who is able to become a homeowner, when they buy, how long they remain a homeowner, and what happens if they sell for whatever reason.

Our study applied this approach to young Australians who were living in the family home at the beginning of the 2000s, following their housing experiences for almost two decades, to 2019.

Only around one in five (22%) followed the traditional pathway of moving out of the family home, then renting, before buying a home. A smaller group (12%) moved directly into home purchase, while a similar share (13%) entered renting and remained there throughout the study period.

Almost half (46%) followed a very different path over the two decades of our study, moving in and out of renting, home ownership, and back to the family home.

Disjointed journeys

Understanding these different patterns matters because two people who are seemingly in the same position – such as two renters – do not necessarily have the same chances of becoming homeowners.

One renter may be spending a short period in rental housing before buying a first home. But another may have rented for many years, with no clear route into ownership.

Alternatively, a homeowner may have followed a relatively stable path or arrived there only after repeated moves in and out of the family home or time renting.

Looking only at where people are today misses that history. It also misses how the timing, sequence, and duration of housing experiences shape what becomes possible later in life.

Homeowners vs. renters’ wealth

Our ongoing research at the Australian Centre for Housing Research is now investigating how wealth outcomes differ according to the housing pathways people follow.

Over five years, our preliminary work (which is yet to be peer-reviewed) suggests households who remained renters recorded only modest growth in median wealth.

Those who entered home ownership or remained mortgage holders accumulated several hundred thousand dollars more, while households that moved from ownership back into renting experienced substantial losses.

The important point is not simply that owners accumulated more wealth than renters. It is that different housing pathways seem to be associated with very different financial futures.

Two-tiered access to housing

Our findings do not mean housing alone determines people’s futures. Households begin with different incomes, family resources, education, and opportunities.

But housing trajectories can reinforce people’s different starting points.

Those who gain access to ownership may accumulate housing equity – and therefore wealth – over many years. That equity can provide a buffer against unemployment, illness, or relationship breakdown. It may also help fund retirement or support their own children into homeownership.

Those who remain outside ownership may face a very different long-term position. They may spend more of their income on rent, have fewer assets to draw on in a crisis, and enter retirement without the protection of an owned home. This is how housing inequality can widen over time.

This longer-term trajectory view changes how we can think about housing policy. Its success cannot be judged only by today’s prices, supply figures, or homeownership rate. These indicators tell us where the housing system is now, but much less about where it is taking people.

But as both our published and ongoing research show, small differences in the timing of entry into homeownership, the length of time spent renting, or a move out of ownership can accumulate into much larger differences in wealth and security later in life.

By Emma Baker, Adelaide University.

Image: Envato

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Young Australians are reaching homeownership later. Here's why.

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