Amid housing affordability troubles, nearly 60% of young adults are ‘rent burdened’

Nearly 60% of young adults are “rent burdened,” meaning they spend more than 30% of their income on housing expenses, according to a new Zillow report.

That’s a slight improvement for Gen Z renters compared to millennials who were the same age a decade earlier.

Zillow analyzed Census Bureau data and found that, as of 2022, 58.6% of Gen Z renters nationwide were rent burdened. In 2012, 60.2% of millennials in their early 20s were rent burdened.

Nearly half of all renters fall into this burdened category, but Gen Z renters shoulder the heaviest load, Zillow said.

Rent burden among young adults peaked at 62% in 2011 but steadily declined to 55% by 2019. However, the trend reversed amid surging rental demand following the pandemic, coupled with decades of housing undersupply, Zillow said.

A previous Zillow report identified the housing deficit as the root cause of the housing affordability “crisis.”

The housing shortage grew to 4.5 million homes in 2022, up from 4.3 million the year before, according to Zillow. That same year, there were about 8.09 million “missing households” — people, including families, living with nonrelatives. At the same time, there were just 3.55 million housing units available for rent or sale.

Jeff Ostrowski, a housing market expert with Bankrate, said developers have been building apartments as they see opportunities in the rental market. The Sunbelt region, in particular, has seen a lot of apartment construction in recent years.

Ostrowski said some areas have seen enough construction to create a temporary glut, though he expects rental rates to continue rising as demand catches up with the increased supply.

Zillow shows the typical rent nationwide is $2,050, up 3.3% from last year. Meanwhile, home prices in the for-sale market continue to rise, despite sluggish sales activity.

Many buyers remain priced out of the market, while some sellers don’t want to list their homes and give up their low mortgage rates.

The National Association of Realtors said Wednesday that the typical existing-home price is now $404,500.

“It’s so hard for first-time buyers to get into the market that they’re just remaining renters for longer,” Ostrowski said. The median age of first-time buyers is now 36.

More landlords are offering concessions to lure tenants as more apartments hit the market, Zillow said over the summer. Rental market supply and demand appear to be coming into better balance, with more multifamily units being completed.

Zillow said in August that a third of property managers were offering concessions, such as free weeks of rent or free parking.

Apartment leasing remains “extremely strong,” Richard Barkham, CBRE’s global chief economist, told reporters last month. He said the apartment and industrial sectors still have a lot of new construction to absorb.

But, as Barkham noted, real estate is “always about local markets.”