The Housing Crunch on Our Younger Residents

Housing is impacting our younger residents -- our community's future.

I was in a meeting not too long ago to talk about a critical issue facing our community — housing. One of the participants in the meeting was talking about the housing challenges faced by his own 20-something child. He lives at home, has saved a bunch, makes good money and still lives at home. Why? To sum it up, the demand for housing has made housing costs skyrocket, and it’s just not a great time to purchase. This 20-something is going to live at home for the foreseeable future.

Keeping Young People Behind

And the above is not exactly a one-off story when it comes to housing and young people in our community; especially families. In Troy, only 1 in 8 homes that are owner-occupied are owned by someone less than 35. However, nearly 1 in 3 homes that are rented are headed by those of the same age. In other words, there are way more renters than owners in our younger ages. Not necessarily a worrying statistic to be sure, but it makes one wonder if younger families are having a harder time of achieving homeownership.

Social media platforms like TikTok have become a sounding board for the frustrations of young adults aspiring to homeownership. Content creators frequently highlight the barriers they face, including soaring home prices, stagnant incomes, and the difficulty of accumulating sufficient savings for down payments. This online discourse paints a bleak picture, suggesting that for many younger families, the dream of owning a home seems to be slipping further out of reach.

Surveys and studies appear to corroborate this sentiment, indicating that younger adults are more likely than previous generations to deprioritize homeownership. This shift in attitude is largely attributed to the challenging housing costs they face. As Mikaela Arroyo, director of the New Home Trends Institute at John Burns Real Estate Consulting, notes, many young adults have relegated homeownership to the realm of "unattainable dreams," choosing instead to focus on other areas of investment.

However, the reality of homeownership rates among younger families tells a more nuanced story. Recent data from Redfin suggests that the share of people in their mid-twenties who own homes is actually slightly larger than it was for Millennials and Gen Xers at the same age. In some Rust Belt cities, buyers under 35 are responsible for nearly half of new mortgages. There are opportunities for young families to be homeowners, but it is not evenly distributed across the country. This contradiction between perception and reality underscores the complexity of the current housing market.

It's crucial to note that these statistics may not tell the whole story. There are scores of studies that focus solely on young adults who are heads of their own households, potentially overlooking those who live with parents or roommates due to financial constraints. When considering the entire cohort of young adults, the picture of homeownership becomes more complicated and less optimistic.

The current economic climate plays a significant role in shaping the homeownership landscape for younger families. Home prices have surged 47% higher than pre-pandemic levels, according to a June report from the Harvard Joint Center for Housing Studies. Coupled with interest rates that have more than doubled since 2021, reaching 7.2% in May 2024, these factors create substantial hurdles for first-time homebuyers.

What Can Government Legitimately Do?

In response to these challenges, there have been some interesting policy decisions. Recently, the Vice President has announced a series of housing proposals that will probably have mixed results. A tax credit program designed to incentivize builders to create starter homes for first-time homebuyers might hold some promise; many tax-credit housing programs, like those to develop senior housing, are very popular and provide real tangible benefits. A proposal to provide $25,000 in down-payment assistance for first-time homebuyers, doesn’t really help the supply-side problems in housing and may just cause housing costs to soar.

Not be outdone, various state and local governments have implemented policies aimed at assisting young and first-time homebuyers. Zoning reforms to increase housing density have become a hot topic in many cities and some states. These changes allow for smaller yards or multiple accessory dwelling units on a single plot, potentially increasing the supply of more affordable housing options.

Some initiatives go beyond land-use reform to invest directly in the development of new homes. For instance, Utah's administration aims to build 35,000 starter homes by 2028, likely requiring builders to rethink traditional plans and incorporate smaller units and yards. At the local level, cities like Rochester, Minnesota, are approving multi-million dollar contributions to develop housing affordable for residents making slightly above the area median income.

Down payment assistance programs are also becoming more prevalent across cities and states. Rather than just giving a set amount to first-time homebuyers, a new Ohio program, for example, works with banks and credit unions to provide high-interest savings accounts for participants saving to purchase a home. Such initiatives aim to help future homeowners overcome one of the biggest hurdles to homeownership: accumulating enough savings for a down payment.

The housing industry itself is adapting to make homeownership more attainable for younger families. Builders are exploring less costly materials and designing smaller units that make better use of space. While these new starter homes may not match the traditional vision of a first home, they aim to provide essential features in more efficient and affordable layouts.

As policymakers and industry leaders continue to address housing affordability, the attitudes of younger families towards homeownership may evolve. The success of various initiatives and programs could play a crucial role in shaping the future of homeownership for this demographic.

And this plays an important role for communities. If communities can attract younger families and encourage them to become homebuyers, these young residents will become more established and more grounded in the community. Homeowners tend to have higher property values, higher propensities to vote and tend to play a more active role in civic life, through being involved with school organizations like the local PTO.

Bringing it All Together

Moving forward, it will be essential to monitor the effectiveness of current policies and industry adaptations in making homeownership more accessible to younger families. Additionally, further research into the long-term impacts of these initiatives on housing markets and generational wealth accumulation will be crucial for understanding the broader implications of current homeownership trends among young adults.

While the perception of homeownership among younger families often skews towards pessimism, the reality is more complex and, in some cases, more positive than commonly believed. As economic conditions fluctuate and new policies take effect, the landscape of homeownership for younger families will likely continue to evolve, potentially bridging the gap between perception and reality.

What Do You Think?

Can government really do anything to help younger people achieve homeownership? Is homeownership valued by younger generations? Our paid subscribers are welcome to leave their ideas and insights in the comment section!

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