BAM Key Details: 

  • A new report from RentCafe shows Gen Z spends more on rent but less as homeowners between 22 to 29 years of age, compared to millennials during the same period of life. 
  • Both age groups spend the same portion of their income on rent between 22 and 29 years of age—26.5%. 
  • The gap widens for homeownership, with Gen Z owners spending 30.2% of their income on housing costs over eight years, while millennial owners spend 36.1%. For both generations, renting is generally the more affordable option, though it varies by market.

Gen Z renters are spending more of their income on housing costs by age 30 than millennials did at their age. 

On the other hand, Gen Z homeowners spend less on housing costs from age 22 to 29 than millennial homeowners did during the same period of life. 

That’s according to a new RentCafe report shedding light on housing costs for Gen Z before age 30, compared to the generation before them. According to Pew Research, Gen Zers are less likely to drop out of high school and more likely to be enrolled in a two-year or four-year college. 

And while college graduates aren’t necessarily better educated, student loan debt does provide extra motivation to earn well (speaking from experience). 

The focus for RentCafe’s report is how much Gen Z should expect to pay on housing before they turn 30. And for that, they looked into historical housing costs as well as earning and spending patterns in nearly 200 U.S. metros, using IPUMS data. 

Specifically, they looked at how Gen Z’s housing costs compared to millennials’ at the same age: 22 to 29 years old. 

Read on for the highlights. 

Housing costs for Gen Z: Renting vs owning

According to RentCafe research, Gen Zers, numbering almost 66 million, will earn an average total of $550,000 (each) in their first decade as adults—14% more than millennials earned in their 20s. 

Income levels vary by metro and are higher in coastal metros, especially Silicon Valley’s San Jose and San Francisco. 

Nationwide, though, when it comes to housing costs, Gen Z will spend $145,000 on rent by the time they turn 30—14% more than the $127,000 paid by millennial renters at that age. 

RentCafe_Renting-vs-owning-costs-vs-income-by-generation-by-age-30

Source: RentCafe

What’s worth pointing out is that Gen Z and millennial renting costs took up the same portion of their income from ages 22 to 29, partly due to wage growth since millennials were in their 20s. Rental costs amounted to 26.5% of household income for both generations. 

Homeownership costs take a bigger toll on both generations, accounting for an average 30.2% of Gen Z’s income from age 22 to 29, while millennials paid an average 36.1%. 

In either case, renting is (and was) the more affordable option for both. But those numbers also mean the gap between renting and owning is smaller for Gen Z than it was for millennials at that stage in life. 

Zoomer homeowners pay an extra $12,000 on homeownership costs compared to Zoomers who rent throughout their 20s—a 14% difference. 

Millennial owners, on the other hand, paid an average of $46,000 more (a difference of 36%) compared to millennials renters under the age of 30. 

RentCafe_GenZ-outearns-millennials-but-pays-less-for-owning-and-more-for-renting-by-30

Source: RentCafe

That said, renter life in coastal hubs is significantly more expensive for Gen Zers, especially in Bay Area metros, Boston, and Honolulu. But those metros also offer the highest incomes for digital natives. Those living in San Jose and San Francisco can earn over $1 million in their 20s.

RentCafe_How-much-GenZ-spends-on-rent-by-age-30-in-197-US-metros-map

Source: RentCafe

Homeownership Costs for Gen Z vs Millennials

For Gen Z, owning a home for those eight years leading up to 30 (22-29) would cost an average of $165,000, which includes mortgage, taxes, insurance, and other housing expenses, not counting the down payment

By comparison, millennials in their 20s paid less for rent at $126,000 (about $18,000 less) but also earned roughly $70,000 less. 

Millennials who owned homes during that eight year time span paid $172,000—almost $7,000 more than the amount Gen Z owners would pay during those same eight years as homeowners. 

That could explain, at least partly, why millennials took longer than previous generations to reach the homeowner-majority milestone. 

RentCafe-How-much-it-would-cost-GenZ-and-millennials-to-transition-from-renting-to-owning-by-30

Source: RentCafe

Gen Zers living in coastal California tech hubs pay most on rent by age 30

Gen Z renters paying the most on housing costs are the ones living in metros with the highest salaries, led by California tech hubs San Jose and San Francisco. 

Zoomers paying rent in San Jose, CA, from 22 to 29 will pay the highest amount at $296,000, followed close behind by San Francisco at $287,000. 

Next in line for the biggest dents in Gen Z renters’ wallets is surf hotspot Honolulu, HI, followed by global culture, entertainment, and arts hubs Boston, New York, and Los Angeles, with San Diego coming in at number seven. 

All the above cost over $220,000 for Gen Z adults renting from age 22 to 29. 

The bottom five metros on the list still exceed the average total paid by Gen Zers who rent from age 22 to 29—by at least another $30,000. 

RentCafe_table-Metros-where-GenZ-pays-most-for-renting-and-owning

Source: RentCafe

The 10 metros with the highest rents are the same for both Gen Z and Millennials. And like Gen Z, Millennials earned more than half a million in most of the metros on the list, while those renting in San Jose earned, on average, more than $1 million from age 22 to 29. 

RentCafe_table-Metros-where-millennials-pay-most-for-renting-and-owning

Source: RentCafe

For Gen Zers under 30, the difference in cost between renting and owning a home from age 22 to 29 can be as high as $170,890 in San Jose to as little as $3,341 in Champaign, IL. 

A Zoomer renting in San Jose from age 22 to 29 will spend 23.7% of their household income on housing by the time they reach 30. A Gen Z owner will spend 37.4% of their income on their mortgage payment, home insurance, property taxes, and more. 

That said, San Jose is also the metro where Gen Zers in their 20s can earn close to $1.3 million—the highest average income in the U.S. 

RentCafe-Top-10-metros-with-highest-cost-differences-between-renting-and-owning

Source: RentCafe

About one quarter of Gen Zers already own a home. And in some metros, the cost of transitioning from renter to homeowners is small enough to incentivize more Gen Z renters to make the switch. 

So, what metros make it easiest? 

Gen Zers living in Ann Arbor, Michigan can actually save $21,379 by owning a home rather than renting in their 20s. 

In this metro—known for its appealing ecosystem for tech companies—homeownership costs for Gen Zers ages 22 to 29 would add up to $136,000, equal to 23.8% of their average income for the area. That total is more than $21,000 less than the $157,000 a Gen Zer of that age would pay for rent in Ann Arbor. 

Those living in Bloomington, IN, and Ocala, FL, can also save money by choosing ownership over rent. For the remaining seven metros on the list below, the gap in housing costs between renting and owning a home are under $13,000 for a Gen Zer weighing the cost of renting vs owning from age 22 to 29. 

RentCafe_Top-10-metros-where-it-costs-less-to-go-from-renter-to-owner

Source: RentCafe

Read the full report on RentCafe for more information, including methodology and an  interactive map showing how much Gen Z would pay renting or owning in 19 states.