As millennials age towards having children, while the generation continues to delay home buying, family-friendly rental units will become more important in the future, according to a new study on family renter housing by the Urban Land Institute, Terwilliger Center for Housing and RCLCO.
To date, millennials and baby boomers have largely evened out demand in the rental market, with young millennials and aging baby boomers driving most population growth—which is why rental development has focused on singles and couples as opposed to family units, the report said.
However, in the next 10-plus years, this is expected to change as more millennials grow their families at a faster rate than baby boomers transition out of parenthood, meaning families will likely drive more rental demand in the national housing market than they have in years past.
The study found that 47.6% of millennial households have children, a number that is only expected to grow in the coming years as millennials reach “peak” family age. In comparison, 55.9% of Generation-X households had children during this time, which the study said highlights the potential for millennial family growth. While there is currently a lack of family-oriented rental housing to meet this perceived demand, this also presents an opportunity for the real estate community.
At the same time, homeowner rates among millennials are declining—40.3% of 25-34-year-olds owned a home in 2019, compared to nearly 55% in 1980—as home prices increase, with the average sale price of a home has grown from about $75,000 to $375,000 since 1980. This is creating a growing demand for all types of rental housing, but especially for millennials with growing families. Middle-income households faced the sharpest decline in homeownership in the past 40 years, the study found.
At the same time, the study found that millennials consider more factors when it comes to purchasing a home, such as proximity to employment, convenience to entertainment, proximity to parks and recreation, availability of larger lot acreage, and access to public transit—all of which are slowing down the home buying experience compared to previous generations and keeping more people in rental units.