On Thursday, the US Census Bureau released housing data from the 4th quarter of 2015 that shows rent continuing to rise at a startling pace nationally - putting untold pressures on households across most income and racial categories. Some organizations, including the Community Housing Development Association, have even started referring to rising rents as an epidemic. But why is rent rising so fast and what are the short/long-term implications?
There are no simple answers to these questions and this blog will continue to explore every theory from every conceivable angle. But for today's post, I will blame millennials (which is something of a national past-time already) for rising rents because they want jobs and can't afford homes. (How dare we!)
It is true that millennials (he said in his sweeping-generalization voice) are moving to cities in unprecedented numbers for a variety of live-style and aspirational reasons (who wouldn't want this guy's life?)
And then the other follows the other (as it were) as firms move to where talent lives - creating an echoing effect on the economy and demography - and rent. I site the case of GE leaving my beloved Connecticut suburbs for the well-educated and well-championshiped millennial workforce of Boston as the most recent high-profile example.
The hunt for creative class jobs isn't the only reason to blame millennials for rising rent. The Census data provided another telling piece of information that points to a potentially epoch-changing trend - declining homeownership rates:
Perhaps nothing has defined 'America and So Can You' as much as homeownership, and though we can debate the virtue of homeownership and the policies created to encourage it (and we will) no one can debate that it represents the epitome of aspiration in our society.
But millennials can't afford to buy a home.
Much has been written about the soul-crushing debt weighing down this generation, which came of age in the wake of the Great Recession (which could have long-term effects* on future earnings in its own right) so it's no surprise that fewer and fewer of its members are buying homes.
Though the above graph is a bit skewed because of its short time-window and by the impact of the housing-bubble (much more on that in the future) the trend is clear. Young people can't afford to buy homes whether they want to or not (and certainly not in the major urban centers where they are flocking). There are also no indications that this trend will change anytime soon, meaning a lot of people will be looking for roommates in the coming years. (So get ready for a lot more Friends-reboots or, if you like, the real thing.)
Which brings us to the central paradox of millennials and increasing rent - they are partly to 'blame' for it but they are also victims of it.
In fact, according to this report, nearly 50% of 25-34 year olds are cost burdened (30%+ of their income goes to rent) while nearly 25% are severely cost burdened (50%+ of their income goes to rent). Add student debt and the bummer parade continues. (And this post was supposed to be a breezy Saturday morning hot take....)
The fact that the largest segment of the US workforce is so rent and debt burdened has major implications for the economy let alone for urban policy makers. How to address the immediacy of the epidemic while incorporating the long term demographic trends present in this census data will call for innovative policy and market solutions (some related to housing and a lot not-related to housing), which as of this writing have not materialized. We'd better hope millennials have a larger say sooner than later.
*link originally on whitehouse.gov but updated as of 6/26/18. Thanks to A. Gryskho