Millennial Homeownership: Why Is It So Low, and How Can We Increase It?

This study shows that the homeownership rate for millennials was 37 percent in 2015, or about 8 percentage points lower than that of the two previous generations (Gen X and baby boomers) at the same age (25–34). We quantify for the first time some factors in the lower homeownership rate:

• Delayed marriage: Being married increases the probability of owning a home by 18 percentage points, after accounting for other factors such as age, income, race/ethnicity, and education. If the marriage rate in 2015 had been the same as it was in 1990, the millennial homeownership rate would be about 5 percentage points higher.
• Greater racial diversity: Because non-Hispanic white households have higher homeownership rates than all other racial and ethnic groups, the increasing diversity of millennials contributes to the lower homeownership rate as well. If the racial and ethnic composition in 2015 had been the same as it was in 1990, the millennial homeownership rate would be 2.6 percentage points higher.
• Increased education debt: A 1 percent increase in education loan debt decreases the likelihood of owning a home by 0.15 percentage points.
• Increased rents: A 1 percent increase in a household’s rent-to-income ratio decreases the likelihood of homeownership by 0.07 percentage points.
• Delayed child bearing: For those who are married, having a child increases the probability of owning a home 6.2 percentage points, after accounting for other factors such as age, income, race/ethnicity, and education.

We provide more detail about two important factors that impact the rate:

• Parental wealth and homeownership status: A child’s likelihood of being a homeowner increases by 9 percentage points if their parents are owners, and a 1 percent increase in parental wealth increases a child’s likelihood of being a homeowner by .016 percentage points.
• Location choice: The preference of educated millennials to move to more expensive urban centers has contributed to their lower homeownership rate.

We show that two factors have mostly minor impacts on the rate change from previous generations:

• increased education rates; and
• aslight attitudinal change toward homeownership.

Finally, we identify two areas of great concern:

Less educated young adults are falling further behind in homeownership. For millennials, the gap in homeownership rates between the more educated and less educated has grown significantly compared to previous generations. The difference in the homeownership rate between the two groups increased from 3.3 to 9.7 percentage points between 1990 and 2015. Less-educated millennials could be falling behind in homeownership because of their unstable incomes and rising rents.

Left unchecked, current trends will result in even greater wealth disparities among white, black, and Hispanic millennials. While millennials ages18–34 in all racialand ethnic groups have experienced a drop in homeownership since 2005, the black homeownership rate has been continuously lower than all groups and has dropped farther than the other groups since 2000. As people of color are less likely to be homeowners and have less wealth, intergenerational transfer of homeownership provides an additional explanation for the persistent disparities in homeownership across racialand ethnic groups.

We also discuss four policies that could increase millennials’ access to homeownership and address the concerns we have highlighted:

Enhance the financial knowledge of young adults about homeownership:

• Provide financial education in high school that includes information about homeownership and down payment assistance programs
• Provide accessible and engaging online training for homebuyers, including information about down payment assistance programs

Use technology to simplify the mortgage process:Use financial technology to streamline and increase the efficiency of the mortgage process.

Expand credit assessment criteria: Include rental, telecom, and utility payment history when evaluating millennials’ creditworthiness and fully capture income in the underwriting process.

Ease land-use restrictions: Change land-use and zoning regulations to allow for more construction, particularly in areas with tight housing supply.

This report was revised January 11, 2019. On page 18, the authors updated the bottom graph in figure 13 to correct typos in the y-axis.