Young people have long struggled to amass the wealth needed to buy a home. But renting is no walk in the park either. (No wonder the stress of renting can age you by decades.)
In a new report, researchers at apartment search site RentCafe.com studied historical housing costs in several hundred U.S. cities, as well as the spending patterns of millennials when they were between 22 and 29, compared with today’s twenty-somethings.
Gen Z, which counts 66 million Americans in its ranks, is set to earn a total of $550,000 before they turn 30, RentCafe found—14% more than millennials did before they hit 30. But that extra earning also means extra spending, which is where the bad news comes in.
Per RentCafe, Gen Z can expect to shell out $145,000 on rent alone before they turn 30, whereas millennials only spent $127,000. With the rate of inflation and the skyrocketing cost of living, Gen Zers in their 20s currently spend about 27% of their income on rent. To be sure, those costs are most pronounced in desirable coastal cities and major business hubs, like New York and San Francisco. But young renters would be hard-pressed to find a market that isn’t rapidly outpacing their paycheck.
Owning a home is hardly an easy way out of the renting crisis, though—and that goes for both Gen Zers and millennials. The day-to-day costs of homeownership would siphon 30% of Gen Z’s income, but 36% of millennial’s when they were in their twenties. Another point in renting’s favor: It’s cheaper than buying in almost every major city.
“With a record number of new units coming onto the market driving rent prices down, those who may have given up hope of homeownership may be able to leverage more affordable rental options—including downsizing to a smaller unit or considering a roommate for the near term—to help build savings for a future home,” Jiayi Xu, an economist at Realtor.com, said in a statement in December 2023.
What’s so bad about renting?
The thought of forking over thousands of dollars per month that you’ll never see again may, naturally, be unappealing. But given the dire economic straits many young people are in these days, it could end up being the most cost-effective option. (Second only to moving back in with their parents, an often cost-free option that many people of all ages have been resorting to. But none more than Gen Z, a third of whom live with mom and dad.)
And it’s not just high earners who aren’t yet rich (HENRYs). Per a RentCafe report from 2023, even millionaires are getting in on the renting game, recognizing how much of a headache mortgages, upkeep, and repairs can be. There’s a record-high number of millionaire renter households—3,381—RentCafe found. That number tripled between 2015 and 2020. Many high earners, RentCafe wrote at the time, “prefer to funnel their cash into other types of assets that hold value.”
Even non-millionaire wealthy folks see the draw of renting; the share of “high-earning renters,” which RentCafe dubs as households bringing in at least $150,000, grew by 82% between 2018 to 2023.
Suffice it to say, if you’re a mid-twenties Gen Zer with low expectations of escaping the rental market anytime soon, you’re in good—and well-appointed—company.