Here's how Much Gen Z Are Projected to Spend on Rent by the Time They Turn 30
Every generation has had to deal with financial challenges as a part of adulthood, but with time the economic conditions have restricted the capacity of younger people to afford things such as a house of their own, even as they gained more purchasing power. Gen Z are now facing unprecedented obstacles in managing their finances amidst a surge in costs caused by rapid urbanization, limited housing supply, and escalating housing demand. But a significant issue exacerbating their plight is income allocation, as a substantial portion of their earnings goes toward rent, leaving little for essential expenses. In addition to this, many are burdened with large student loan debts, making it even more challenging to secure affordable housing.
RentCafe revealed the findings of its recent study where Gen Z will be seen spending about $145,000 on just their rent by the time they attain the age of 30. The expense increase is 14% more as compared to the amount Millennials spent at the same age.
"As the generation moves into our prime workforce and consumer markets, several shifts are happening simultaneously. Gen Z is feeling the impact of financial independence amid economic uncertainty. These factors are shaping their views of work and life and what success looks like," explains Marcie Merriman, EY Americas Cultural Insights & Customer Strategy Leader.
The study leveraged the data from IPUMS, which further says on average Gen Z has to spend $165,000 for purchasing a home which is still less than what Millennials spent on the same expense i.e. $172,000. This does not concern the generation that much as the Gen Zers are expected to earn an average of $550,000 in their twenties as compared to Millennials who earn $478,000.
"Younger Americans haven’t had it easy in this economy, but any step they take toward strengthening the building blocks of their finances will pay off over time," said Sarah Foster, analyst at Bankrate.
The study offers a comprehensive comparison of Gen Z's expenditure on renting versus buying homes, compared to the Millennial generation. These financial commitments extend beyond housing costs, encompassing lower wages, limited job opportunities, impulsive spending habits, and other generational trends. Moreover, the study delves into specific cities, providing an in-depth analysis of the real estate market.
A closer look at specific cities reveals the magnitude of these financial burdens. In California, for instance, Gen Z renters may shell out $300,000 by age 30, particularly in overpriced cities like San Francisco and San Jose.
Homeownership in these areas is even more out of reach, with costs reaching $470,000. Similarly, in New York and Washington D.C., Gen Z renters are expected to pay $226,000 and $212,000, respectively, by age 30, underscoring the affordability crisis gripping these metropolitan areas.
Interestingly, Gen Z is transitioning to homeownership at a faster pace compared to previous generations, with over a quarter already owning homes. But, where can young Zoomers find the most affordable path from renting to owning?
In Ann Arbor, Michigan, Gen Zers can own for $136,000, saving $21,000 compared to renting ($157,000). Similarly, Bloomington, Indiana, and Ocala, Florida, offer savings of $4,400 and $3,400, respectively. Other favorable locations include Champaign, Illinois; St. Joseph, Missouri; Grand Rapids, Michigan; and Charlotte, North Carolina, with disparities under $10,000.