The American Dream may have been homeownership since the founding of the first colony, Jamestown in the early 1600s, but that is increasingly out of reach for the youngest cohort of Americans – Gen Z. Gen Zers overwhelmingly prefer to rent stating that it is cheaper and more practical. You’ll gain insights into this and much more in this article.
Who Are Gen Zers?
Gen Z is the generational group born between 1997 and 2012. At 68 million strong, they make up approximately 20% of the total American population. They started to move out post-pandemic. And their habits of becoming independent are profoundly shaping the American residential real estate market.
Gen Z renters were 5.4 million strong in household size in 2022. That number is expected to be the largest rental group in America by 2030. Gen Z is already the largest working-age generation in the workforce, and their beliefs are already revolutionizing and profoundly redefining the American workforce. Still, an analysis of that is for another article.
Gen Z is heavily in debt and many don’t have the assets needed to own a home. Gen Zers are much more likely than other generations of Americans to live paycheck to paycheck. Consequently, about a third of Gen Zers believe they will never be homeowners. Gen Zers are also the first generation in American history who prefer to live in lower-cost areas, well out of the suburbs.
Why Do Gen Zers Prefer to Rent Instead of Buy?
Gen Zers have much less money and far fewer financial resources than previous generations of Americans. So, they value the freedom to spend their money as they want. Gen Zers shun homeownership because homes come with a fixed or variable mortgage, forcing them to tie down precious financial resources to pay off.
When Gen Zers rent, they can always break their lease anytime they want. That gives them more freedom and opportunities to find more affordable living arrangements whenever they want or need to. They have real choices regarding spending their discretionary income in those scenarios.
That means they can take more vacations each year. Gen Zers are even more influenced by the travel bug than Millennials. They can also access the funding needed to start their enterprises should they find employment difficult to find or undesirable. Another reason why Gen Zers prefer to rent is convenience.
They don’t worry about paying property taxes or homeowners insurance when they become tenants. Their landlords deal with maintenance issues instead of them. Rent generally doesn’t suddenly increase, so Gen Zers have an easier time budgeting each month and year since they can predict their cash inflows and outflows better.
Renting Supports the Digital Nomad Lifestyle
The concept of the digital nomad lifestyle of living and working anywhere in the world with an Internet connection is the ultimate dream for most Gen Zers. Gen Zers can easily move when they rent. All they have to do is break their lease and either transport their belongings to their new home or store them.
Gen Zers who are homeowners have to deal with the hassle of putting their homes up for sale if they want to move.
Student Loans Are Pricey
Gen Zers often felt lied to since they were persuaded to take out hefty student loans to pay for degrees that many don’t even use. That combined with the fact that starting salaries have stayed stagnant for most professions for several years means that most Gen Zers have to wait for several years before they can afford to buy a house.
Apartments, for the most part, have lower monthly rents than houses with their monthly mortgage payments. So, Gen Zers can live in an apartment without substantially increasing their overall debt burdens. Renting also gives Gen Zers a sense of independence while they save enough money to be able to afford the down payment and mortgage on a small house.
The Job Market is Changing
It’s difficult to almost impossible to find a good job in a stable company, much less a long-term opportunity. That, combined with the fact that companies now love to post fake jobs, means that Gen Zers struggle to find higher-paying jobs allowing them to become homeowners. Gen Zers love to work in the freelancing and gig economies.
Renting Offers A Sense of Community
Many apartment complexes offer perks and amenities that offer a sense of community for Gen Zers. These include free gym club memberships, co-working spaces, rooftop lounges, and pet-friendly apartments. Gen Zers can mix and mingle with like-minded people in their age groups in these community settings. That’s something that they value.
To Conclude
Gen Z is breaking with the American tradition of owning a home. They are more individualistic and value all types of freedom – especially financial freedom. Those are the reasons why more of them are preferring to rent instead of becoming homeowners.
