Are older generations blocking US millennials from reaching their dream of home ownership?

Research tells us that millennials have the lowest rate of home ownership of any generation before them; now we want to know why. The fourth segment of our US Housing Study explores the forces working against 25–40-year-olds in the housing market – and who they feel is to blame…

Blame the Boomers

Just 43% of US millennials are currently homeowners. Less than half of those who do not already own a home are in the process of saving for one (48%), and 22% say they will be relying on a family loan, gift or inheritance to fund their down payment. And yet, in the course of our research, millennials consistently laid the blame for their generation’s housing crisis at the door of the generation that represents their parents and grandparents. Why? This hasn’t always been the case for 25-40 year olds. A respectable 51% of Baby Boomers owned homes when they were 30 years old, as did 48% of Gen Xers. But the reality is that these trends are all related.

We all want the same houses

Our survey has highlighted one big problem for younger generations looking to buy. As bad luck would have it, it turns out that Baby Boomers – who are now blessed with longer life expectancies than any generation that came before them – are deciding to downsize… at the precise moment millennials are looking to buy starter homes. This is inevitably putting a strain on the flow of available houses and, of course, those with the time and cash flow to invest in their search are able to snap up affordable homes as soon as they come on the market. As a result, many millennials are feeling unfairly treated, disillusioned, and even resentful of their older counterparts and a system they feel is broken. Quotes we have heard from disenfranchised millennials range from:

“Boomers need to stop buying starter homes as their retirement homes. It's driving the cost up to where first-time home buyers can't afford it.”

To:

“The American Dream never really existed before, but it’s dead for millennials. Boomers took advantage of many things, then got rid of those programs for us. Prices for everything increased, unions have been dismantled or impossible to start. And wages are stagnant or falling, with increasing inflation and cost of living.”

And even:

“I think it will get a lot better as Boomers start to die off.”

Yikes. Is this fair? According to many of our survey respondents, this battle for the (affordable) houses isn’t even the only factor at play.

An inheritance imbalance?

Down payments are hard to come by. Whether begged, borrowed or gifted, almost a quarter of millennials (22%) are relying on money from family members to ensure they have enough to put down on their starter homes. But the older generations strike again! The fact that Baby Boomers are living longer than previous generations means they are in a better place to receive inheritances from older relatives, and millennials may be being skipped over altogether. Add to that the fact that demographic inequalities will impact the ability of their parents or grandparents to pass on property or other assets and young people may be waiting a long time to receive that down payment money. As one frustrated millennial survey respondent puts it:

?“The only homeowners from my generation that I personally know all inherited their property or their parents gave them a six-figure down payment. A few actually had parents buy them a home outright. These people all have wealth as a result of the land/property in their family…”

Other forces working against millennials

First up, and most significantly, we have to mention the sharp increase in prices making starter homes far less affordable than they have been for previous generations of young buyers. These prices were bad enough, and then the pandemic happened… Along with lots of other lovely “gifts”, Covid-19 brought with it the fastest-rising prices in US history. As cities saw a mass exodus, elsewhere started to feel the intensification of a supply and demand issue which had already been causing problems without the pandemic. To add insult to injury, research shows that private equity firms bought one out of every five houses in the US in 2020, and bought 15% of homes for sale in 2021 – and you just know those firms aren’t run by 30-year-olds! The plot thickens.

So, what is there to be done?

More potential buyers means there is the need for more houses. As always, we believe that inclusive capitalism is the key to helping solve our greatest social challenges. If we can use technology to build more affordable housing stock, whether through high-quality modular homes or new-build developments, we will already be helping make sure everyone has somewhere appropriate to live. Business models that help renters become owners and urban regeneration that includes rehabilitating the housing stock in smaller, more affordable cities, and bringing their infrastructure into the 21st century, could also help.

View all of our U.S millennials and home ownership research here.

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