8.2.13 | The readers of tea leaves are searching cup bottoms to discern the housing habits of Millennials or Gen Y—those currently in their 20s to early 30s. Homeownership is down and renting is up. Many are wondering if this is more than a passing fad, and what it means for cities. Is homeownership an anchor for metro areas, making them more resilient? The jury is still out.
As I wrote here back in February, thanks to the Great Recession Millennials are less likely to be homeowners, car owners, or credit card carriers. Barbara Ray noted the same patterns here at BRR, and here at the MacArthur Foundation-supported Network on Transitions to Adulthood. As aging Baby Boomers continue selling their houses, she wrote, “the question many are asking is, will this generation be able to pick up the slack?”
My guess is: no. As Lynn Ross, executive director of the Urban Land Institute’s Terwilliger Center for housing put it, “I do think their preferences are going to result in sustained change. This group is so different from previous generations.”
She’s backed up by some hard numbers. According to a recent study from the Federal Reserve, only 9% of 29- to 34-year-olds got a first mortgage between 2009 and 2011, down from 17% ten years ago.
Part of this is economic. The recession delayed a lot of young people. Jobs were scarce, college was expensive.
Real estate agents, young buyers, and industry researchers cite depleted confidence, high unemployment, student loan debt, poor credit, low inventory, competition with investors and stricter qualification standards as reasons for the decline in homeownership among those ages 25 to 34.
But part of it is a slower path to adulthood. Marriage is being delayed, and many young people are enjoying their twenties and early thirties as singles in the city.
I think there’s another reason they won’t be buying those suburban homes. A generalization, I admit, but consider the simple fact that you can’t be online while driving, but you certainly can while riding the train to and from work. That means we’re going to have a lot of houses that nobody wants.
Enter the potential for apartments. HousingWire.com cites a USA Today (of all publications!) statistic that there were one million more renters among the 25-34 set in 2011 than there were in 2006.
And this is not just a young adult phenomenon. The 2013 State of Housing by the Joint Center for Housing Studies at Harvard reports that:
- Renter households [of all ages] increased by more than 1.1 million between 2011 and 2012, representing all net household growth during that time. If this pace is sustained, the current decade would easily surpass the record growth of 5.1 million households during the 2000s.
- The number of renter households aged 55-64 grew by 80 percent between 2002 and 2012, compared to 50 percent growth among all households in that age group.
- More members of groups with traditionally high homeownership rates are becoming renters, including married couples with children, high-income households, and white households.
Then there is a newer, and interesting argument on The Atlantic Cities that apartment-dwellers, dubbed “Solos” or “Singletons,” are good for cities because they make them more sustainable. Author Eric Jaffe cites Devajyoti Deka of the Alan M. Voorhees Transport Center at Rutgers University, whose research has found that the number of people who live alone is increasing. Deka found they tend to rent apartments and use public transit, and are more likely than other households to move to be closer to work. Moreover, he found in tracking the behaviors of “solos,” that they prefer cities in part because they earn more there. Why?
Deka attributes the increased earnings of urban solos to their employment flexibility. His data show that solos are much less likely than married people to move to get a bigger home, for instance, and much more likely to move to be closer to work. In everyday terms, if an employer offers a solo $20,000 more to move cities, that solo has far fewer barriers to accepting the job.
“Solos can optimize their earning power when they move,” says Deka.
The implications of these trends on national housing policy have been noted by the Bipartisan Policy Center, whose report we discussed here, and the Congress for the New Urbanism, whose Live/Work/Walk Initiative aims for the reform of federal housing lending policies that remain hostile to the development of denser, mixed-use neighborhoods—the very ones more and more data show are the way of the future.