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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.
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