If asked one question to find out someone’s age by their economic experience, what would you ask?

It’s a silly question for most older Australians. But here’s a surprising answer: Have you ever had a pay rise?

For many under-35s, the answer would be no. Most have never had a pay rise.

What about affording your own house, or even getting on the first rung and getting a housing loan? Again, that could be a generational marker differentiating the over-35s from those who are younger.

Grattan Institute economist, Brendan Coates, says home ownership and even the dream of owning a home is slipping away from younger generations, exacerbated by wealth inequality.

Coates is concerned that home ownership in Australia is increasingly tied to the wealth of someone’s parents.

It is a view supported by Grattan’s CEO, Danielle Wood, who previously claimed the decline in home ownership is most obvious among the poorest groups. 

In 1981, 60 per cent of the poorest under 34-year-olds owned a home. Today, the figure is just 20 per cent.

These findings are worrying because of the link between home ownership and financial security.

A finding of National Seniors Australia’s recent research was that homeowners were more satisfied with their financial security in retirement.

Ms Wood said, “The fact remains that it is now only the richest young people, or the ones with the richest parents, that can afford to [own a home].”

Being locked out of the housing market has a major impact on the future of our kids and grandkids – limiting something that older people have taken for granted – the ability to accumulate wealth and build financial security.

Without that, many traditional life-long and lifestyle assumptions become harder – such as marriage, child-raising, building a home and family life, holding down a permanent job, investing for the future and independent retirement.

The growing divide is intensified by the division between parents that can finance their children into the housing market and those who cannot.

“Large intergenerational wealth transfers can change the shape of society. They mean that a person’s economic outcomes relate more to who their parents are than their talent or hard work,” Ms Wood said.

The problem is wealth inequality and not income inequality. That’s the view of Grattan’s Brendan Coates. 

But what’s the difference?

Wealth inequality has grown over the past 20 years, and inheritances are a major cause.

“Big inheritances boost the jackpot from the birth lottery. Richer parents tend to have richer children,” Coates said.

“Among those who received an inheritance over the past decade, the wealthiest 20 per cent received on average three times more than the poorest 20 per cent.

Homeownership is a driver of wealth in Australia.

Brendan Coates blames urban sprawl. He questions the view that younger first home buyers want to live in detached housing in outer suburbs, even if that’s more affordable.

“Many would prefer a townhouse, semi-detached dwelling or apartment in an inner or middle suburb rather than a house on the city fringe.”

Coates argues that part of the solution to the housing crisis is improving the supply of medium-density housing in the inner and middle rings of our cities.

This change could also benefit older Australians.

National Seniors’ past research on downsizing found that one-third of seniors had downsized, and another quarter had considered doing so.

One of the many barriers to downsizing, noted by survey respondents, was the ability to move to a smaller place in their current community.

Coates’ proposal of more medium-density housing to support younger generations getting into the housing market may also improve downsizing options for older people because it would allow them to stay in the communities they know and love.

For further reading: Grattan and Grattan.edu.au