Parents’ housing linked to children’s economic future: NUS study

An NUS study has revealed that the type of housing Singaporean parents own has significant influence on their children’s future economic status.

The study was co-authored by Low Tuck Kwong Distinguished Professor Sumit Agarwal and Associate Professor Qian Wenlan from the Department of Finance at NUS Business, together with Associate Professor Sing Tien Foo, Dean’s Chair and Director of the NUS Institute of Real Estate and Urban Studies (IREUS) and Assistant Professor Yi Fan from NUS Design and Environment.

The study found that children from low-income families, defined as having parents in the bottom 60th percentile of the nation, show upward mobility in housing wealth. In contrast, children from middle-income families with parents ranked in the 60th to 80th percentile are worse off than their parents in housing type, in a large part due to them capitalising on government housing subsidies. Meanwhile, children born to the wealthiest 20 per cent of families keep closest to their parents’ wealth levels, but are nevertheless worse off in absolute rank partly because there is less room for them to surpass their parents.

Intergenerational housing wealth mobility also differs across different regions of Singapore due to local policies and neighbourhood characteristics. Upward movements are concentrated in new towns such as Punggol, Pasir Ris and Jurong West where government policies have promoted quality public housing with subsidies. In addition, the Married Children Priority Scheme, which provides additional subsidies to encourage children to live near their parents, has enabled them to climb up the housing wealth ladder.

Higher mobility is also evident for children growing up in public housing, as well as when there are fewer restrictions for the BTO scheme. This is because public housing, especially for first-time buyers, is heavily subsidised by the government and provides a head start for new homeowners.

The researchers believe that the high-quality of public schools is one of the factors that allows Singapore to have one of the highest levels of mobility among lower-tiered households compared with other countries. Singaporean children from low-income families benefit as long as there are public schools in their neighbourhood, whilst children from middle-income families living in new towns may not be able to find a place in high-quality public education institutions, preventing them from keeping pace with their parents’ wealth.

In contrast, as children from the upper-income families generally remain in the same core central areas as their parents, their mobility is largely flat.

“Housing wealth is the largest component of Singaporean’s overall wealth, so understanding intergenerational wealth mobility is key to predicting how younger Singaporeans will fare in the future,” said Prof Agarwal. “Intergenerational wealth mobility is enabled by favourable public policies. In the longer term, it is likely to stabilise as citizens marry across socioeconomic classes.”

See press release and media coverage.