Gen Z’s housing bust laid bare: 15 million more adults under 35 are living with their parents than a decade ago

The issue is affordability. Over the past decade, urban rents have risen by about 4% per year, while wages for full-time workers have increased by only 0.6% per year. This means that it’s harder than ever to live in a big city on a typical salary – especially if you’re a new graduate without much work experience.

The situation is even more challenging for aspiring homeowners: The average home price in the United States has risen about 90% in just 10 years, or more than 6% each year. And as prices rise — the average home sells for more than $400,000 now — so do the home buyer columns. The average first-time homebuyer in the United States is 38 years old, up from approximately 31 years old.

Why is the rent so high?

There is simply not enough housing. As an economist, I know that when demand rises faster than supply, prices should increase. And supply is very limited in places where people want to live: big cities like New York and San Francisco.

In most of these cities, planning and zoning laws prevent developers from building enough to meet demand. For example, reworking a plot of land from commercial to residential often requires mountains of paperwork. And in many cities, objections from neighbors can halt a proposed development. These are just two of many hurdles local governments throw in the way of homebuilding.

One city that has tried something different is Austin, Texas. After intentional relaxation of zoning laws a few years ago, Austin saw a boom in home construction. Rents fell by 10% in one year and rose as much as 22% in two years after this change. By making construction easier, Austin made it cheaper to live there.

I don’t think it’s a coincidence that Austin has a much lower share of young adults living with their parents than many other cities. Only 6% of working adults in the Austin metro area are with parents, one analysis found, versus about 14% in greater San Antonio and 20% in greater Los Angeles.

Pros and cons of living with rentals

One obvious advantage of living with parents is that they tend to charge below-market rents, or nothing at all. This makes it easier to save a deposit on a home, helping young people get on the property ladder sooner than they otherwise would. In fact, homeownership rates among those 25 to 34 have risen slightly since 2016.

However, there are potential drawbacks, especially when it comes to socializing. Living at home with parents can make it more difficult to meet new people. This, in turn, can partly help explain why Americans marry and have children later in life. These delays may not seem important, but they can leave people feeling like they are behind in life, which can impact their health and well-being.

I also wonder if living with parents indirectly makes young people unexploited at work. That’s because older people often live far from urban centers where younger people are more likely to find jobs directly related to their degrees. Job satisfaction rates are significantly lower among 18 to 29 year olds than among the rest of the working population.

A problem for all of us

Housing shortages aren’t just a problem for young adults. A recent analysis I found insightful was headlined “The Housing Theory of Everything.” He argued that the case helps explain at least part of the current malaise in the American economy.

For example, when people cannot live and work where they want, they are unable to fully use their talents. This contributes to the relatively slow productivity growth the United States has seen in recent years.

Likewise, if people cannot live in areas where they might meet and work with like-minded individuals, they have fewer opportunities to exchange ideas, which can hinder innovation.

If housing shortages are indeed encouraging young people to delay having children, it could make it more difficult for the United States to fund Social Security and other government programs in the future.

This makes it easier to build new homes in places where people want to live and work can go a long way to alleviate these problems. High rents can translate into high barriers to adulthood as well.

Rohan Shah, Assistant Professor of Economics, University of Mississippi; Institute of Human Studies

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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