You may not have heard of “dynastic wealth”. It hurts a lot of young Kiwis

Your parents’ level of wealth can determine your chances of advancing in New Zealand, as the generational wealth gap widens. reports Kate Newton.

A housing crisis now in its second decade has turned into a full-fledged generational wealth and welfare crisis, according to data compiled by the Treasury.

Economic commentators say the data also points to a growing class divide, where “dynastic wealth” determines the future prospects of young New Zealanders.

A baby born today can expect to live longer and healthier lives than previous generations of Kiwis.

* New Zealand ‘a good place to be old’ but young people are falling behind, Treasury warns
* Over 300,000 New Zealanders owe more than they have – is that a problem?
* The Return of the Landed Nobility: Why the Rich Get Richer

But that’s about where the good news ends for young people in Treasury’s. inaugural wellness report – which represents a move towards a much broader idea of ​​economic “success” than just financial indicators.

Young people are more alone, are in greater psychological distress, have declining academic achievement and lower life satisfaction.

But in a report filled with statistics that show that younger generations really do have it worse on almost every front, there’s one particularly glaring number.

A housing crisis now in its second decade has turned into a full-fledged generational wealth and welfare crisis, according to data compiled by the Treasury.

Sungmi Kim / Stuff

A housing crisis now in its second decade has turned into a full-fledged generational wealth and welfare crisis, according to data compiled by the Treasury.

“Since the beginning of this century, the gap between [the] the wealth of those over 65 and under 35 more than doubled,” Treasury Secretary Carelee McLiesh said in a speech launching the report.

The main culprit? “The limitations of our wealth data make it difficult to be precise, but we estimate that at least half of this discrepancy can be attributed to the growth in house prices.”

The share of people in their early 30s who own their homes has fallen from 73% in the 1980s to 51% at the last census in 2018.

The graph below shows that although all age groups are doing better in 2018 than they were in 2001, the net worth of a 65 year old has more than doubled, while the less 50-year-olds experienced much more gradual gains.

Rather than peaking in the mid-1950s, people’s wealth now continues to accumulate until the late 1970s. This means that a 65-year-old’s wealth is now 6.3 times that of of a 35-year-old, compared to 4.3 in 2001.

“What this graph reflects is a massive increase in house prices that is keeping people out of home ownership,” says economic inequality researcher and writer Max Rashbrooke. Not only are young people less affluent than their older counterparts, but they increasingly lack access to key means of creating their own wealth.

The only thing standing between a millennial crowd and their pitchforks may be a national lack of assertiveness, Rashbrooke says.

“In New Zealand it doesn’t look very promising because we are quite apathetic given the levels of inequality that exist. But if you get really massive wealth imbalances, things start to fall apart.

However, Rashbrooke says focusing too much on the generational wealth gap risks missing the growing wealth disparities within each age group.

“There’s this tension between seeing inequality as a generational issue and seeing it as a class issue.”

Max Rashbrooke says there is a generational wealth gap - but a growing class divide is most important.

Rosa Woods / Stuff

Max Rashbrooke says there is a generational wealth gap – but a growing class divide is most important.

Wealth has increased overall and that wealth “has got to go somewhere,” he says — most likely to children in those older age groups.

“But not all of these baby boomers are rich. Only the wealthiest baby boomers will have money to hand over… So the long-term story the chart tells you is one of growing disparities between families: between wealthy families of wealthy baby boomers and millennials rich and poorer families of poor baby boomers and poorer millennials.

If this trend continues unchecked, Rashbrooke fears a society where success is increasingly determined by “dynastic wealth.”

“I’m afraid you’ll end up with a very heavily stratified country…especially a country where your prospects in life depend less on the choices you make as an adult and more on whether you chose the right parents. “

Housing and economics commentator Shamubeel Eaqub points to a recent consumer survey which showed that half of respondents had received help from their parents to enter the housing market. “You get this hereditary source of wealth and access to housing that didn’t exist before.”

This lack of equitable access to housing not only creates a wealth divide, but “a new fault line” in society, where those excluded from housing find themselves excluded from associated benefits.

“It limits how we live, which means it limits our well-being,” he says. “We know there are health impacts [of renting]there are educational impacts because kids who move a lot can’t make those local connections, and people [are] delaying having relationships or having children… All of these life choices are restricted because we have this screwed up housing market.

Shamubeel Eaqub asserts that inherited wealth and a


Shamubeel Eaqub says inherited wealth and a ‘screwed up housing market’ threaten New Zealand’s egalitarian identity

It’s not just an immediate crisis anymore, says Eaqub. “These growing inequalities reduce social cohesion and contribute to more volatile and extreme policies. It is a persistent and serious attack on New Zealand’s identity as an egalitarian society where social and economic success is open to all.

A well-being report backgrounder also makes a direct link between housing wealth and well-being. “On average, owner-occupied housing tends to be larger, in better condition, a good store of wealth and… more affordable than rental housing. Rentals, especially for people on low incomes, are very expensive relative to income, smaller and more likely to be overcrowded, in poorer condition, less healthy and less conducive to tenure stability.

There are other tangible benefits that those who are excluded from the market are deprived of, the document continues. “Another way of thinking about housing is as a base for…raising a family, participating in cultural practices such as manaakitanga, forms of recreation such as gardening and DIY, and finding belonging and identity in a local community.

Ella Bates-Hermans / Stuff

Banks, like any business, want to charge as much as they can. That’s what it means for your interest rates.

Older people — even those who own homes — are no longer immune to the problem, says Eaqub. “Middle-income parents and grandparents find that their own children cannot afford their own homes. They see, my child is still a tenant at 40 and my grandchildren have to change schools.

The underlying causes of housing affordability should remain a policy priority, but perhaps it’s time to try other things, says Eaqub. “A tax on wealth, or perhaps just real estate wealth, would be a good way to generate additional taxes from unearned wealth gains.”

Rashbrooke says one way to make individual wealth less important is to prevent people from turning it into an advantage in other areas. “If you have a better healthcare system, a truly free system, you don’t need to save so much wealth against the prospect of getting sick. Or… if you have a very good social protection system, then people don’t need so much savings against the prospect of economic crises.

Most of the time, this would mean a redistribution of wealth through taxation. “If you’re going to take things out of the market…then they’ll have to be paid for by everyone on general taxation.”

He would also like to see much better data collected on inheritances and other financial gifts in New Zealand. “Inheritance is, in the developed world, becoming an increasingly important part of wealth [creation]… At the moment we hardly collect data on inheritance.

Thing understands that a revamped version of the Household Economic Survey will begin collecting some of this data within the next year or two.

About Ian Crawford

Check Also

Why EverQuote shares may remain weak

EverQuote (ALREADY) stocks are down nearly 40% since the start of 2022, pushing the 14-day …