HOUSTON – The lack of affordable housing is steering many Millennials away from the higher cost housing in American downtowns.
Instead, many Millennials are residing in suburban, affordable neighborhoods or living with parents or roommates to save money, according to a study released Wednesday at the Urban Land Institute’s Spring Meeting in Houston.
The youthful Millennial generation is a demographic cohort born around the turn of the century and considered by some to be people born between 1982 and 2004.
The largest generation of Americans ever, numbering 79 million people, the Millennials will be instrumental in shaping the growth patterns of the nation for years to come, said Henry Cisneros and former secretary of the U.S. Department of Housing and Urban Development.
Cisneros, moderator of a ULI panel on the topic, said developing affordable housing for Millennials, a key source of talent for the workforce, is a challenge for growing cities.
New research sponsored by UDR, Inc. and published by the Urban Land Institute (ULI) showed that despite their current lifestyle constraints, most Millennials are optimistic about the odds for improving their housing and financial circumstances in the years ahead.
Millennials are also known as members of Generation Y.
The study – Gen Y and Housing: What They Want and Where They Want It, looks at the behavior of Generation Y now that many have entered the housing and job market. It also examines the lingering effects of the Great Recession on Gen Y’s ability to get ahead, and the impact this is having on where they are living, either by choice or necessity. Among the key findings based on the survey sample:
- Only 13 percent of Gen Yers live in or near downtowns; 63 percent live in other city neighborhoods or in the suburbs.
- Fifty percent are renters, paying a median rent of $925.
- Twenty-one percent currently live at home, and of those, 42 percent moved back home after living independently. Only 10 percent of those now living at home expect to still be there in five years.
- Fourteen percent live in households with three generations of family members.
- Eighteen percent of all Millennials and 27 percent who rent share housing with roommates. However, 58 percent of those with roommates would prefer to live alone.
- Sixty-percent work full-time; and an additional 15 percent work part-time; however, 27 percent feel they are underemployed.
- Thirty-eight percent consider themselves savers; 30 percent, spenders; and 32 percent say they are both.
- Eighty-three percent own automobiles (lowest percentage of owners, 74 percent, are in the Northeast; highest, 88 percent, are in the South)
- Virtually all expect to own a home eventually, even though they are not necessarily convinced that housing is a good investment.
- Nine out of ten expect to match or exceed their parents’ economic circumstances.
The report, written by ULI Trustee Leanne Lachman, president of Lachman Associates LLC in New York City; and Deborah L. Brett, founder of Deborah L. Brett and Associates in Plainsboro, N.J., is based on a nationwide survey conducted in November 2014 of 1,270 members of Gen Y (Millennials), aged 19 to 36.
Despite the trade-offs they are making for affordable housing, Millennials remain steadfast in their preferences for neighborhoods with urban characteristics, such as a high degree of walkability, transportation alternatives, and easy access to shopping, entertainment and places to “hang out,” Lachman noted. “Gen Yers want to live where it’s easy to have fun with friends and family, whether in the suburbs or closer in,” she said. “Their desire for an urban lifestyle suggests that the current trend of urbanizing suburbs will present lucrative opportunities for the development community for decades to come. This is a generation that places a high value on work-life balance and flexibility. They will switch housing and jobs as frequently as necessary to improve their quality of life.”
Gen Y and Housing found that 45 percent of Millennials moved at least twice in the past three years, which reflects the high mobility of the generation. Despite their long-term aspirations for homeownership, the top reasons they are drawn to renting are that they do not have to shoulder the responsibility for maintenance and repairs; they have more flexibility in being able to stay or move; and there is no long-term commitment to either the housing unit or location. Among the Gen Yers who rent apartments, two-thirds live in low-rise garden-style units that tend to offer fewer amenities, but are more affordable than high-rise, amenity-rich developments.
In addition to those renting apartments or condos, 38 percent rent single-family homes – a substantial number that reflects the impact of the Great Recession and the housing collapse on the single-family sector. With large numbers of foreclosed houses acquired by investors in urban regions across the nation, single-family home rentals – including those rented by unrelated people as well as families — will continue to make up an important part of the rental market in the years ahead, the report predicts. Millennials who rent single-family homes say they are drawn to the privacy, backyards, and greater interior space and storage space.
Overall, 26 percent of Gen Yers currently own homes; of that percentage, 47 percent are 31 to 36 years of age. Eight out of ten owners live in single-family homes; 11 percent, in attached units; and 7 percent, in condominiums. Nearly half have owned for more than three years. Of those who own, 46 percent – less than half — said they bought because they believe that owning is a good long-term investment; 41 percent said it offers stability; and 40 percent said they wanted more privacy and space. Sixty-two percent are very satisfied with homeownership in general, and 64 percent listed the stability and safety of their neighborhood as the most positive feature of their location. However, a third of the owners list drawbacks such as the inability to do their own maintenance or repairs and lack of time for chores. Twenty-six percent worry about losing their homes if they lose their jobs.
Seventy percent of Millennials who do not yet own a home expect to be homeowners by 2020; and most expect to use money they have saved for a down payment. Yet, similar to those who already own, less than half feel that homeownership is a good investment – suggesting that Gen Y, after witnessing the housing collapse, does not necessarily equate owning a home with being financially savvy. The cost of housing is by far their highest priority in choosing where to purchase, although neighborhood safety, proximity to work, community character, proximity to family and friends, and proximity to shopping, dining and entertainment are also top priorities.
“In general, Millennials are an intriguing combination of optimism and realism,” Lachman said. “They have high hopes for themselves in the long-term, despite having to temper their short-term expectations. They are proving adept at making the environment in which they currently live fit how they want to live, while not losing sight of how they see themselves living in the future. The choices they make will be hugely influential in how our urban regions grow throughout the 21st century.”