Millennials: It’s hard to scroll through a newsfeed without encountering a new article about this frequently discussed demographic. One aspect of Millennials that has been heavily debated is their reluctance to buy homes. Is this due to a high burden of student debt, an unwillingness to follow the Baby Boomers’ “American Dream,” or an urgent need for flexibility (and perhaps a fear of commitment)? Whatever the combination of reasons, it’s clear that many Millennials are putting off home purchases and instead pouring their funds into rent—at a rate higher than you might expect.
A Whopping $93,000 in Rent by Age 30
How much does the average Millennial spend on rent before the age of 30—and how does that amount stack up to other generations? Using U.S. Census data, a recent study by RentCafe found that Millennials spend around $93,000 on rent over an 8-year period (from age 22 up to and including 29).
[This study included single people paying “average” rent on their own. All amounts were adjusted to 2017 prices.]
The Millennial average of $93,000 in rent represents more than what Baby Boomers paid by the same age—and it also represents a staggering 45% of their total median income (which is around $206,600 over the 8 years). In comparison, Gen Xers spent around 41% of income on rent, while Boomers managed to keep their rent burden to 36%. While both Gen Xers and Boomers made less on average than Millennials, they also spent less.
Millennials’ Financial Landscape
But why aren’t Millennials buying houses, you might continue to wonder. The jury’s still out. Economists have cited crippling student debt amongst other factors (somewhat) beyond Millennials’ control—but there’s also evidence suggesting that this generation spends more on certain non-necessities that didn’t tempt other generations, including Lyft and Uber, eating out, pricey Starbucks, city living—and yes, $18 avocado toast.
In fact, evidence suggests that younger Millennials, currently aged between 22 and 29 years, throw even more funds towards rent than their older generational counterparts. This group is paying a median of $97,400 in total rent by age 30, whereas older Millennials (aged 30 to 40) pay around $90,500.
A Rising Trend in Rent
Adjusted for 2017 dollars, Baby Boomers paid an average of $71,000 in total towards rent before age 30, Gen Xers paid $82,200, and Millennials shelled out $93,000. If that trajectory continues, Generation Z can expect to spend over $102,000 in rent by 30.
Furthermore, a reliance on technology may drive Gen Z to seek out expensive rental amenities to meet their tech-savvy demands. Or will they discover real estate investing, become a generation of landlords, buck all expectations, and live financially free? Only time will tell.
Do these stats surprise you? Why or why not? Where do you think renting trends will lead?