The choice between renting and buying a home involves a number of important factors, but younger generations are likely to pay a lot more in lifetime rent than their parents and grandparents. According to a new analysis by HotPads, Inc. [1], members of Generation Z “can expect to spend $226,000 on inflation-adjusted rent in their lifetime.” For comparison’s sake, that total is around $24k more than millennials should expect and $77k more than the baby boomers.
There is some good news for Generation Z, however. While total rent expenditures during their lifetimes will be higher for Generation Z than for their forebearers, members of Gen Z are likely to achieve the goal of homeownership somewhat than the generation that preceded them. According to HotPads’ analysis, baby boomers typically rented for around a decade before purchasing a home, and for millennials, the number was around 12 years. That timeline looks to drop back down slightly for Generation Z, hitting 11 years.
HotPads reports that, despite Generation Z still demonstrating enthusiasm [2] for the dream of homeownership, they face a number of challenges along that path.
"Millennials entered the workforce during the Great Recession—a period of scarce job prospects and strong demand in rental markets across the country—making it harder for them to keep up with rising rents and still put money aside for a down payment," Joshua Clark, Economist at HotPads, said in a statement [3].
"Millennials have also delayed major life decisions that typically coincide with homeownership, like getting married and having children, adding on to the total number of years they've spent renting,” Clark continued. “While there are a lot of unknowns about how the American economy will evolve over the coming decades as Generation Z grows into adulthood, if historical trends hold, the long-term forecast right now suggests that Generation Z is likely to benefit from a stronger job market than millennials. While rising rents and home values mean that it won't be as easy for Generation Z to become homeowners as it was for Baby Boomers, they should get there sooner than millennials did."
How do the lifetime rent differences between the generations stack up in different American locales? In San Francisco, the gap is wide indeed. In San Francisco, the median monthly rent is a whopping $4,330. Over their average of 11 years spent renting, Generation Z residents in the City by the Bay can expect to pay $570,900. Millennials would have paid only $399,400 during their average of 12 years spent renting in the same city, and San Francisco baby boomers would have come out of their decade’s worth of rental having paid only $230,000.
On the more affordable end of the spectrum, Generation Z renters in Cleveland, Ohio, (current median rent $1,350) can expect to pay only $177,800 over the course of their renting lifetime. For millennials, the total was $168,000 and for baby boomers it was $156,600.
HotPads, Inc., is a San Francisco-based and Zillow Group-owned apartment and home search platform for renters in urban areas across the United States. For this analysis, HotPads examined data taken from both the U.S. Census Bureau and the Bureau of Labor Statistics, then combined that info with its own rental data in order to gauge rental expectations for the various generational cohorts. For purposes of this study, HotPads defined baby boomers as born between 1945 and 1964, millennials as born between 1980 and 1994, and Generation Z as born between 1995 and 2010.