Renters are being hit harder by inflation than homeowners—especially Millennials and Gen Zers.
A recent Redfin report found that goods and services increased 11.6% year-over-year for Millennial renters and 11.3% for Gen Z renters. The inflation rate for the U.S. population rate as a whole is 8.5%.
Asking Rents Continue to Rise
Everyone is dealing with increasing prices due to inflation. But with asking rents soaring over the past year (and up 13.5% year-over-year in July), those renting are hit the hardest.
Combine that with student loan debt and relatively low incomes, and it’s easy to see why Millennials and Gen Z renters have difficulty saving up for home ownership.
Homeowners are forking over more money at the grocery store and the gas pump, but at least the number on their mortgage statement isn’t going up every month. Combine high rental prices with student loan debt and relatively low incomes, and it’s difficult for millennials and Gen Z renters to put money into savings, retirement accounts and down-payment funds to eventually buy a house. They may also have higher interest rates on debt, which cuts further into their potential savings.
Income After Housing Payments
The typical Gen Z adult earns a median income of $40,953. While incomes for this generation will grow, it makes for a tight budget in the meantime. After housing payments, food, and transportation, they have just 1.9% of income left over, down from 7.7% in 2020. Put another way; if they saved all of their disposable income, they would only have $766 in their account at the end of the year.
On the other hand, the typical millennial makes a median of $85,233. This leaves them with about 26% of their income after housing and other expenses, down from 30% in 2020. At the end of a year, saving all disposable income, the average Millennial would have $21,959, putting them in a better position to save for homeownership.
The Bottom Line
Millennials and Gen Zers—especially those who rent—feel inflation’s effects more than anyone. While they may think homeownership is out of the question, there are ways to make it happen.
By educating renters on down payment assistance programs and monthly housing payments, you can help them plan for their future as homeowners.