New Study on Millennials and Housing Takes on Intergenerational Conflict Over Home Ownership

Millennials Blame Boomers and Older Generations for Affordability, Access Issues

Just as the younger generation of home buyers is reaching the point in their lives when they want to buy a starter home, they are entering a market where, simultaneously, Baby Boomers are deciding to downsize, putting a strain on available housing stock. With longer life expectancies and better overall health than any generation in history, Boomers are not quite ready to give up on private home ownership—and with the horror stories about retirement homes and care facilities during the pandemic, this attitude becomes understandable.  One survey respondent noted: “[Baby] Boomers need to stop buying starter homes as their retirement homes. It’s driving the cost up to where first-time home buyers can’t afford it.”

To further exasperate the problem for millennials trying to buy a home in this under-supplied market is that Baby Boomers are not their only competition. Baby Boomers are just the tip of the iceberg.  While millennials pin the blame on the older generations, a far less visible factor is the contingent of well financed institutional buyers who have collectively taken a lot of stock off the market. Private Equity investors and buyers have, in fact, contributed to the shortage of housing by doing what businesses in free market economies do best: identifying rising assets and acquiring them in bulk.

The way millennials perceive it, the older generations have almost all the spending power and are able to reach into their pockets and pull out over-full price offers, often in cash. This leaves the younger generation—scrambling to get together a down payment and struggling to establish credit—on the losing end of these deals. They do not have the ready cash, nor, just as often, the time or ability to jump on properties the minute they come on the market.

This is where the deeper inquiry comes in. While there is truth in these comments and more than a few clues about where things went wrong for them, millennials hold the additional awkwardness that they are often the beneficiaries of the older generation’s largesse—according to our research, almost a quarter of them couldn’t get together a down payment without borrowing or being gifted family money.

• Nearly half (48%) of non-home owning millennials are saving for a down payment
• 55% of those who are saving cannot afford to buy yet
• 12% of millennials have abandoned their plans to buy a home
• 13% of millennials considering a COVID-driven move want to be Closer to family while 8% wanted to move away from family

Accordingly, there’s a quasi-war over housing going on between U.S. millennials and the generations comprising their parents and grandparents, with many 25-to-40-year-olds caught between blaming older generations for their difficulties in becoming homeowners and feeling dependent on them for necessary financial help if they are ever to succeed. A broad new study conducted by Legal & General Group, a financial services firm and global investor, dives into the deeply held grudge millennials hold against Baby Boomers for thwarting their home buying plans.

In this latest segment of a recent research study titled “Mind the Gap: The Intergenerational Home Ownership Blues,”the studylooks at the skyrocketing cost of housing and how changing intergenerational housing needs and other unseen factors are contributing to the reality of housing unattainability for many millennials. With longer healthy life expectancies than ever before, Baby Boomers are deciding to downsize but remain in privately owned housing, putting a strain on affordable housing stock just as the younger generation of home buyers want to buy starter houses. While the long-term consequences of these demographic shifts are still unfolding, the study found other factors exerting added pressure on the housing market, including institutional investment.

Long known for its diverse friend groups, the millennial generation is now experiencing significant inequality in wealth between those who are college educated and those who are not, and far worse wealth inequity between white and Black millennials. This inequality is only cemented by the probable demographics of parents and grandparents who are likely to be leaving properties and other wealth building assets to their millennial-aged offspring. Another obstacle is that, with older generations’ longer

healthy life expectancies, it’s conceivable much of this inherited wealth will come down to generations older than millennials.

Commenting on the results of his company’s latest study, Legal & General Group Chief Executive, Nigel Wilson, stated: “The severe shortage of affordable housing in the U.S., as well as the disproportionate amount of wealth held by older generations, significantly mirrors what we’re seeing in the U.K. Beyond older generations staying put in their own homes or being in a more competitive position to purchase starter-size smaller homes as they downsize, we see other market forces at work which are worsening the supply-demand imbalance.”  Nigel Wilson reported that a part of the solution to this imbalance is constructing a larger stock of affordable homes for first time buyers to purchase and creating more opportunities for ownership through rent-to-buy programs.”

Adding to the problem, the pandemic brought with it the fastest-rising real estate prices in U.S. history—a fact that millennials may not have been able to quantify, but of which they felt the effects. The sharp increase in the median price of houses can certainly be traced back to the age-old economic law of supply and demand.  The pandemic created a panic of people seeking to move out of crowded cities, for a variety of reasons; but this urban diaspora came on the tail of a trend of affordable housing scarcity that had building for some years. When a commodity is scarce, the price tends to go up; when several entities are competing for the same item, the one with the most money wins. All of it—the competition and the inflated prices— contributes to the shortage, and economic exclusion.

The proportion of 30-year-old, U.S. home buyers has gone down steadily with each passing generation—over half of Baby Boomers owned a home at 30, 48% of Gen Xers, and so far millennials are at the bottom with just 42% owning a home. Considering that home ownership is a fundamental way to build wealth, it bodes poorly for millennials that affordable housing is becoming increasingly inaccessible to them. We should be meeting the demand by creating more opportunity, not less, for home ownership.

There are several creative approaches to solve this crisis, from utilizing new technologies to build more affordably, for example, in the form of high-quality modular homes, to business models based on helping renters become owners, to rehabilitating the housing stock in smaller, more affordable cities and bringing their infrastructure into the 21st Century. Indeed, these are some of the approaches we’re taking to try and alleviate the housing shortage. There are many ways to solve this crisis—we call on other companies like ours to follow a similar path forward that still achieves a high return on capital invested. By developing solutions that will yield the broadest benefits for all, we can raise more boats, for millennials and the rest of society.

Legal & General is one of the United Kingdom’s leading financial services groups and a major global investor, with international businesses in the U.S., Europe, Middle East and Asia. With over $1.4 trillion in total assets under management.  The research cited in this article studied the attitudes and changes, as well as geographic shifts, U.S. Millennials are experiencing in relation to home purchases and affordable housing. The research was compiled using original survey data 875 U.S. based Millennials who do not own a property.