According to a new study from RENTCafé, Millennials will not only spend more on rent in their first decade as adults; they will also spend nearly half their income on their rental housing. “Many Millennials find renting more affordable and hassle-free than buying,” observed RENTCafé blogger Florentina Sarac. However, she went on, the generational preference for renting is not always so much a preference as a necessity. Millennials are making more money than previous generations, but they also carry more debt (much of it student loan debt) and have higher lifestyle expenses than previous generations.
“They’re said to be spending more on things that are not necessarily essential, like Uber rides, pricey coffee, or eating out,” Sarac noted, adding the Millennial preferences for “urban areas and big cities” also increase their cost of living and the likelihood that a Millennial household will opt to rent instead of buy.
Millennials will not only spend more on rent in their first decade as adults; they will also spend nearly half their income on their rental housing.
The study based its conclusions on U.S. Census data. Analysts segmented the data by generation and viewed the span of time during which that generation was aged 21 to 29, the eight-year window leading up to 30. Theoretically, this window of time is the period during which an individual would be most likely to rent and also most likely to be living alone. All data was adjusted to 2017 prices and only considered single people paying rent alone.
Millennials have a rent burden of 45 percent, which is actually only slightly higher than the 41 percent posted by Generation X. By comparison, Baby Boomers paid about a third (conventionally considered to be affordable) of their income in rent, or 36 percent. Median incomes were $195,700 for the Boomers, $202,100 for Gen X, and $206,600 for Millennials. Continuing with the adjusted-to-2017 data, RentCafé established that Millennials earn nearly $11,000 more in rent than did Boomers, but they are also paying nearly double that number in higher rents. Younger Millennials (those 22-40 at present) paid about $7,000 more in rent than their “older” (aged 30-40 at present) counterparts. The same report indicated Generation Z, now aged about 20, will likely pay just over $100,000 in rent by the time they turn 30.