Gen Z have higher incomes and are staying longer at the ‘Hotel of Mum and Dad’

Young people born from the mid-1990s onwards are enjoying higher living standards than their millennial predecessors so far in their careers, in part by becoming the stay-at-home generation, according to new Resolution Foundation research.

The report finds that Gen Z has become the stay-at-home generation, with almost two-thirds (63 per cent) of young adults aged 20 to 24 now living in their family home – a rise of 12 percentage points since 2011. Even among those aged 25 to 29, the share of stay-at-homers now stands at nearly a quarter (24 per cent), up from 19 per cent in 2011.

The growing popularity of ‘Hotel Mum and Dad’ is due to other forms of housing being out of reach, says the report, with impracticably high rents and house prices. Back in 2012-2014, even among those aged 24 or under, a third (33 percent) were private tenants. But by 2022-2024 that had fallen to 28 per cent, all while the proportion remaining in their family home increased.

These prolonged stays at the ‘Hotel Mum and Dad’ should theoretically also make it easier for young people to save for a deposit for their first home. However, the separate, but related, ‘Bank of Mum and Dad’ is still pivotal to getting people onto the housing ladder. Around one-third of first-time buyers last year had parental help, around 20 percentage points more than twenty years ago.

Overall, 20-somethings today are still far less likely to own than those born in the 1980s or 1990s: the share of benefit units headed by someone in their 20s who owned their homes fell by half between 1989 and 2023, from 22 per cent to just 11 per cent.

To help those young people without access to the Bank of Mum and Dad onto the housing ladder, the authors propose a new equity loan scheme – a government-funded ‘Starter Deposit’ in which the state would provide a loan of 5 per cent of an entry level home.

But while the big societal shift toward staying at home suggests a particularly tough outlook for young people today, the report finds that Gen Z are actually enjoying higher incomes in their early careers than their millennial predecessors. After all, staying in the family home tends to mean lower housing costs.

Even before taking account of these lower housing costs for some, those born between 1996-2000 currently have incomes 15 per cent higher (£3,700 a year) than those born 1986-1990 had at the same age. These higher incomes for younger cohorts are driven by them earning more in their early careers than their predecessors, who came of age in the aftermath of the late-2000s financial crisis. For low-earning 20 somethings, the recent rises in the minimum wage have substantially boosted pay, renewing generational progress.

There are reasons for caution though. The very youngest cohort, born from 2001, look to be on a lower income-trajectory than those born a few years earlier. And that’s for those who can even get a foot in the door – the UK’s growing NEETs crisis casts an ominous shadow over recent progress on incomes. Prioritising new support to get young people into education or work will be key to guaranteeing continued generational progress, say the authors.

Lalitha Try, Economist at the Resolution Foundation, said ‘’Gen Z are earning more in their early careers than their much-maligned millennial counterparts, giving them a living standards boost.’’

‘’But they are far more likely to still live with parents, with almost two-thirds of those aged 20 to 24 now calling Hotel Mum and Dad home. Impracticably high rents and house prices have driven this boom.’

“With around one-third of recent first-time buyers now receiving familial help, the Government should consider a targeted Starter Deposit Scheme to help those young people without access to the Bank of Mum and Dad onto the housing ladder.’’