Photo: Robert Clark
Millennials in their twenties spend nearly 50 percent of their income on rent. And, thanks to rising rents, younger Millennials are likely to pay even more today than their older cohorts, according to a report released this week by the listing site RentCafe.
Millennials spend on average $92,600 on rent between the ages of 22 and 30. That amounts to 45 percent of their total income during those years. By contrast, Gen Xers and Baby Boomers spent $82,200 and $71,000, respectively, on rent during their twenties.
Of all generational groups RentCafe looked at, Millennials earned the most in their twenties. Millennials earned on average $206,600 in their twenties, which was higher than Gen Xers and Baby Boomers by $4,500 and $10,900 on average, respectively. These figures were adjusted for inflation by RentCafe for its study.
Younger Millennials, now aged 20 to 29 years old, will be paying about $7,000 more of their income on rent compared to older Millennials — thanks to rising rents and static income growth. That equates to 47 percent of their income on rent during their twenties.
“Millennials are quite a large cohort when looking at the year-of-birth range. This is why in our study we highlighted the differences between younger and older Millennials as well — younger Millennials earned more compared to older Millennials, but they also spent more. And, also true, is that they had different job markets,” Adrian Rosenberg, RentCafe communications specialist, tells BuzzBuzzNews.
And, the next generation — Generation Z — is likely to be the most rent burdened of all generations.
According to RentCafe, if rents continue to rise at the current rate, Generation Z, now aged around 20 on the upper end, will have paid a staggering $102,100 on rent by the time they hit 30.
“Although not very different from Millennials, Gen Zers are more tech savvy and highly reliant on technology and, as a result, their future homes will have to meet their technological needs,” RentCafe says in the digital release.
Gen Z is expected to be a more sedentary generation compared to previous generations. Real estate experts predict that they will no longer require amenities like swimming pools or fitness centers but computer labs and game rooms instead.
And these high tech updates are likely to drive monthly rents up even higher.
“Gen Zers should expect to pay more in order to get more,” adds RentCafe.
Still, despite how much younger Millennials are burdened by rent — and student loan debt — they may continue renting simply because buying a home is not an attainable goal.
However, older Millennials are now aging into their prime homebuying years. Their demand is likely to be a key driver for home sales.
“Their lifestyle patterns so far show that Millennials need affordable homes with attractive amenities. And as they start to form families, they’ll be ready to put their hard-earned money into their own home,” says RentCafe.
For the report, RentCafe analyzed Census data, going back to 1974 through today. It looked at median rents and incomes during those periods. The study refers only to single people paying the average monthly rent on their own. The data was then adjusted to 2017 prices, using a cumulative rate of inflation for each year.
And while it may be surprising to learn that younger Millennials are earning more than previous generations, RentCafe says they didn’t compare actual generations but rather individuals belonging to each generation.
“So we actually didn’t compare generations among each other but rather individuals in their 20s belonging to each generation. Even though Millennials in their 20s earned more than Gen X-ers did at the same age, they also were more rent-burdened. Therefore, after paying the rent for 8 years, Millennials remained with less money ($114,000) than Gen X-ers ($119,900) which translates into lower discretionary income as well,” Rosenberg says.
Click here to read the entire release.