Times they are a-changin’. We’ve seen a big shift away from the perfect American household dream of 2.5 kids, working for one company until retirement, and a house with a two car garage in the ‘burbs. Now, millennials (those born between the early 1980s to early 2000s) job hop like it’s a hobby, wait longer to start families, and avoid long term residential situations. We dug into a few of the alluring and realistic reasons why multifamily professionals can continue to count on millennial renters for the coming years.
1. Location, Location, Location! – Buying a house or townhouse in the city or near the super trendy neighborhood is way out of reach for millennials right now. Besides the high costs, a lot of homes in up and coming, popular neighborhoods often require renovations…another cost millennials don’t want to take on. The next best thing is renting in or near those areas to stay close to the action without breaking the bank.
2. Commuting is a DRAG. – No one likes traffic. It is a waste of time that leaves everyone feeling frustrated. Millennials are more apt to walk, bike, use public transportation, or even take advantage of shared car systems like Zipcar. These modes of transport are usually more prevalent within cities, which makes the affordable starter houses in the suburbs less desirable.
3. Amenities Included – Yes, please. – The first family home for most people doesn’t have a pool, rooftop lounge, or even a gym. Heck, most family homes will never have these. Millennial renters are taking full advantage of these luxuries. They are already included in the cost of rent and can be seen in almost every apartment building they’ll live in.
4. No Commitment. – Millennials live for flexibility, spontaneity, and freedom. Renting represents all of that for them. They can try out a new apartment, neighborhood, or even city every year. If the perfect opportunity comes along they can pick up and leave without much worry. It’s the ideal balance of having a home without the commitment.
5. Experiences Over Things – Traveling is BIG for millennials. In fact, 6 out of 10 millennials said they would rather spend extra income on adventures/ experiences over material goods. So even though they aren’t saving much at the end of the month (see #14), what they do have is going toward weekend getaways or group trips.
6. No Surprise Expenses – Air conditioner out? Water heater on the fritz? Broken toilet? Fridge acting up?…Not their problem. Millennial renters have enough on their mind without having to deal with the surprise expenses homeowners often face. Why worry when the solution is only a service ticket away? Fewer surprise expenses mean more money for deliberate experiences.
7. Super Security – Apartments have all kinds of security put in place to protect their tenants and property: gated parking, garage openers for residents only, key cards to enter the building, neighbors nearby, multiple floors with less access, security cameras, even 24 hour security guards. Granted, not all apartments provide every one of these security measures, but really how many single family homes have even half of these? Millennials appreciate the extra security built into the cost of their rent.
8. Less to Keep Clean – Less space = less things = less to clean. Dusting, vacuuming, and mopping are a lot less time consuming when it’s just 800 sq. ft. Leaving more time for aforementioned adventures and catching up on Netflix.
9. Cheap Utilities – Speaking of smaller spaces…they tend to require less to cool down, heat up, and power. Some apartments include utilities in the price of rent so it is a set price, others split it up per apartment. Either way millennials pay a lot less for water, gas, and power in 800 sq. ft. than they would in 2400 sq. ft.
10. What’s a lawn mower? – No lawn maintenance. No raking. No trimming trees. No weed whacking. No Sunday afternoon lawn mowing. And consequently, millennials save hundreds of dollars by avoiding the cost of the tools needed.
11. School Districts – Schmool Districts – Graduating millennials have at least nine years (see #15) before they even have to worry about schools. A good school district is one of the main motivators for families moving into the suburbs. Millennial renters generally don’t have to take it into consideration at all when choosing where to live. Giving them the ultimate freedom in living area decision.
12. Rising Rent – Even though it seems counter to the point, rising rent attributes to more millennials continuing to rent. WHAT? OK, so… Rent.com did a survey and found over 50% of renters spent over 30% of their income on rent EACH MONTH. After rent and other regular monthly expenses (see next point) there isn’t too much left over.
13. Crushing Debt – Well, Debt – In 1994 the average debt owed by a graduating senior was $9,450. In contrast, 2015 graduating seniors will owe on average more than $35,000. Apply a 6% interest rate to that average and assume they will repay in 10 years, they are looking at $389 a month. This can be a big monthly expense for new graduates, which leads to our next point…
14. Savings, What Savings? – With such a big chunk of their salary going to student loan payments and rent, millennials don’t have the extra cash to save up for a down payment. This is a big reason most millennials aren’t even thinking about buying a home any time soon. The barrier to entry is too high for many in the years following college and…
15. Why Buy Something You Don’t Need? – There is no pressing need for a family home for most millennials until at least 5 years after college graduation because they are waiting later to hit major milestones. On average millennial men wait until 29 to get married, a six year increase from 1970. An average millennial women waits until 27 to get married and 26 to be a first time mother. A difference of seven and five years from 1970. There is absolutely no rush for millennials to be in a permanent home after college.
As much grief as millennials often get, no one can say they aren’t pragmatic. Many millennials say they would like to buy in the next five years, but will take all the above reasons into consideration before they make a move. Generation Z will come of age soon and it’s likely they will follow in the millennial’s footsteps. With all the same factors in place, Gen Z will definitely see the allure in renting, so it’s a good time for apartments.
We’d love to hear what others think on the subject, so feel free to leave a comment below. If you’re interested in getting more updates on CRE and multifamily news sign up at www.rescour.com