The millennial generation is roughly defined as those born between the early 1980s to the late 1990s. Millennials constitute the largest living generation today, surpassing baby boomers in huge numbers. On account of its size, this generation has a significant influence on business and market trends.
An interesting fact about millennials is that they don’t seem to be heeding conventional wisdom that views home ownership as a means to build equity. A recent Rent.com survey of 1,000 renters between the ages of 18 and 34 found that the vast majority of them (nearly eight out of 10) don’t plan on trading their apartments for homes anytime soon. According to a Pew Research survey conducted in 2016, over 70 percent of young adults between ages 25 and 35 moved into a rental property that year, as compared to 22 percent who moved into a home. Homeownership is on the decline, especially among the younger set.
There are many factors ranging from affordability to convenience that millennials cite as reasons why they prefer renting to buying.
The most popular reason for millennials choosing to continue renting was that the monthly cost of renting is more affordable than buying. In fact, four out of 10 renters gave affordability as their primary reason for choosing to rent. But affordability isn’t just a factor for deciding between renting and buying; it’s also one of the top priorities for many renters when searching for a new apartment.
Of the millennials surveyed, 57% ranked affordability at the top of the priority list. It is a well-known fact that renting doesn’t help you build home equity. However, when you look at monthly rent vs. monthly mortgage, renting ends up being the more frugal option (which leaves more money available to pay for things like food and gas). Plus, home ownership includes costs such as home insurance, closing fees and property taxes, all of which add to the financial burden of buying a house.
I have more flexibility
One-fifth of all respondents stated freedom as the reason they preferred renting to buying their own place. For a good chunk of millennials, the option of picking up and moving when their lease is up (or even before, if their landlord allows sublets) is very attractive. In contrast, a mortgage can feel very binding. Whether this means being able to travel abroad on a whim or move to a more desirable neighborhood across town, millennials place a lot of value on having that kind of freedom.
‘Landlord, There’s Something Wrong With My…’
If you have ever had to deal with a clogged toilet or broken dishwasher, you know what a relief it is to be able to pass that labor and expense off to your landlord or building management. Home maintenance issues can be a big hassle, and 10% of the millennial renters surveyed said they preferred to rent for the exact reason that as a renter, you don’t need to worry about maintenance issues.
Renting an apartment does come with a great deal of responsibility, but for the millennials that are home-maintenance-challenged, having some help in that area is a huge perk of renting.
It’s the Only Way I Can Afford This Neighborhood
Especially when you live in a big city, pretty much the only way you’ll be able to afford to live in the most trendy or desirable neighborhoods is by renting. Eight percent of the survey respondents said they’d rather rent in an expensive area than not have the option to live there at all.
Renting makes trendier areas more accessible to younger age groups who are in the early stages of their career and aren’t making quite as much money. Of course, trendier the neighborhood, higher the rent will probably be!
I’m in College
About 8% of the surveyed millennials said that they chose to rent simply because they hadn’t graduated yet.
Because life after college is hard to predict for many people, it doesn’t make sense to buy a house before completing your degree. It’s important to be able to accept an internship or start your career across the country if the opportunity arises!
I’m a Commitment-Phobe
Almost one in 10 renters said they preferred not to commit to a neighborhood right away if they had an option. Signing a short-term lease feels like a great way to get to know the different neighborhoods you’re considering living in, especially while moving to a new city. Renting gives you a way to get a sense of the price, the vibe, and the commute of those areas before making that big long-term step.
I Can’t Get a Mortgage
Student debt in 2018 has reached $1.4 trillion, and this has made it harder for millennials with little credit history to qualify for a mortgage loan. About 9% of survey respondents said that difficulty in getting approval for a mortgage was the reason they preferred renting.
No matter what reason people choose to rent rather than buy, it’s clear that renting is rising in popularity. More than six out of 10 of the survey respondents hadn’t lived in a rental growing up but they weren’t planning on leaving the renting lifestyle anytime soon. It will be interesting to see how the growing trend of millennial renters may shape the housing and rental market in the years to come.