Figures showing the collapse in home ownership among millennials on middle incomes should be treated as evidence of the “folly” of choking off investment in homes to rent.

That’s the response of a landlords’ group to new research that shows young people on middle incomes are less than half as likely to own their own home as previous generations their own age.

Just over a quarter of those aged between 24 and 34 and earning between £22,200 and £30,600 (the middle 20% of the income scale) own a home, research released by the Institute for Fiscal Studies (IFS) said.

That compared with 65% in the same age group in 1995-6, according to its figures.

The IFS said that for nearly 90% of 25- to 34-year-olds, average house prices are more than four times their annual income after tax.

Middle income young adults born in the late 1980s are now no more likely than those lower down the pay scale to own their own home, it claimed.

Those born in the 1970s were almost as likely as their peers on higher wages to have bought their own home during young adulthood.

Andrew Hood, a senior research economist at the IFS, said: “Home ownership among young adults has collapsed over the past 20 years, particularly for those on middle incomes.”

There has been a suggestion that millennials preferred to live “digital nomad” lifestyles, which may have partly accounted for the fall in home ownership, but the IFS research appeared to counter that view.

The Residential Landlords Association (RLA) said the findings showed that the Government needed to reconsider its policy of taxing landlords.

David Smith, RLA policy director, said: “This huge increase in the number of young people unable to buy their own home means that more are renting and for longer periods. This shows the folly of government policy imposing higher taxes to deter investment in new homes to rent.

“The scale of the housing crisis demands a complete rethink from government with policies needed to support investment in homes to rent to meet the increasing demand.”

Meanwhile Will Handley, chief executive of online lettings platform HomeRenter, called for the modernisation of the private rented sector, in order to make allowances to the increased number of young people renting.

He said: “The private rented sector needs to be modernised to accommodate for the growing number of young adults renting.

“The rental market needs to make sure it doesn’t price out people too.

“We recently found less than half (45%) of tenants are happy renting with unreasonable letting admin fees being a top gripe (42%).

“70% of tenants said they would prefer to rent direct from a landlord suggesting a desire to cut out the middle man estate agent.

“The reality is young adults are used to a digital world and traditional estate agents have failed to tap into this.

“Proptech is filling the void, enabling landlords and tenants to connect directly online and cut out estate agency fees, reducing costs for all parties.”

Nonetheless, recently released figures have pointed to first-time buyers returning to the market.

Last week, UK Finance said the number of first-time buyers has hit a decade-long high, although the average first-time buyer is now 30 and has an income of £41,000 a year, according to its figures.

In the same week, haart also claimed first-time buyers were back “in a big way”.

Housing Minister Dominic Raab said: “Through schemes like Help to Buy, we’re helping more people on to the housing ladder and last year saw the highest number of first-time buyers in the UK since 2006.”

“We’ve recently cut stamp duty for first-time buyers to help thousands more. But we want to go further and faster and our ambitious plan backed by targeted investment will help even more people by delivering the homes Britain needs for young families, key workers and those on low and middle incomes.”