Alternative Calculation Shows Millennials Lag Further Behind in Homeownership

Conventional methods of measuring home ownership may be significantly overstating ownership levels among millennials amid the challenges this group faces.

This becomes especially important because millennials remain well behind previous generations when it comes to owning homes, according to new research from Apartment List. Even though, numerically, millennials buy more houses than other groups, the homeownership rate for those born between 1981-1996, stood at 45.5% using the Census Bureau’s conventional estimate in its 2023 Current Population Survey.

By comparison, the homeownership rate was 70% for “the silent generation” (born between 1928-1945), 74% for Baby Boomers (born 1946-1964), and 65% for Gen X (born 1965-1980).

The reality could be even worse using Apartment List’s alternative calculation. The conventional, officially reported homeownership rate is based on the share of housing units that are owner-occupied. The alternative calculation measures homeownership at the individual level (i.e., the share of adults that are the householder, or the spouse of one, in an owner-occupied home).

“To demonstrate the nuance more clearly: consider a household that includes a married couple (who own their home) and their two adult children who live with them. Using the conventional household definition we would conclude a homeownership rate of 100 percent; there is one household and it is owner-occupied. But if we look at the individuals within the household we get a rate of just 50 percent, which feels more consistent with how we think of homeownership: as something a person attains, rather than something a household attains,” the Apartment List report states.

Ironically, the fact that younger adults are waiting longer to form their own households and living with family longer biases homeownership upwards using the conventional method, the report contends. “Calculating it at the individual level, on the other hand, solves this problem by identifying ‘young adults who rent’ and ‘young adults who live at home equally.’ ”

Compared to its predecessors, the millennial generation by age 30 was off to a slow start in homeownership, partly because of the economic collapse caused by the Great Recession that lasted from 2007 to 2009 and made renting more financially feasible than owning. At the same time, many Gen Xers lost their homes to foreclosures, allowing the millennial ownership rate to catch up with them by age 40.

Since 2020, millennials have tended to migrate from dense, expensive cities to smaller, more affordable ones, the report notes. “Today, the Millennial homeownership rate is highest (50 percent) in low-density non-metropolitan regions and gets smaller as metros get larger. It falls to 44 percent in markets of fewer than 1 million residents, 41 percent in markets of 1 to 5 million residents, and 33 percent in the nation’s largest metros,” the report states.

More recently, members of Gen Z, born in 1997 or later, have also entered the housing market. In 2023, eight percent of this cohort owned a home. However, they have been hurt by the rapid rise in home prices and high interest rates, forcing some to rent longer or stay at home. The “Build to Rent” phenomenon is one option for both millennials and Gen Z.

The report notes that some politicians have caught on to the problem and are working on solutions to the housing crisis. “If successful, these experimental policies could build political momentum and pave the way for more-substantial reforms aimed at improving affordability and homeownership,” the report concluded.