Millennials make up nearly 40% of the workforce in Canada. Homeownership is no longer the end goal for most working adults. Whereas previous generations pursued homeownership as the ultimate goal for their adult working lives, the latest generation of adults—millennials—are choosing to rent rather than own their own homes.
In comparison to older generations (Baby Boomers & Generation X), Millenials have a substantially lower percentage when it comes to owning their home. Baby Boomers and Generation X had a fairly comparable percentage of the population owning their home when they were 25 to 34 years of age at roughly 45%. The millennial generation however at the same age are averaging roughly 37% of the population owning their property. CNBC Article
Why are millennials taking a different path towards their end goals for homes? Let’s take a closer look at why millennials are choosing to rent over owning their own homes.
Many millennials work in larger cities and more populated areas—but it’s precisely these areas where housing is the least affordable. The median prices for homes in the cities and larger towns where most millennials are living are much higher than the average income for the millennial generation. Larger, more developed Urban cities have much higher priced real estate then rural areas or smaller cities. Millennials are unable to save the amount needed for a down payment and/or do not qualify for a mortgage. Simply put, most millennials aren’t buying homes because the prices are significantly higher than they can afford.
In the past, home ownership was part of cementing your location for the foreseeable future—and this holds true today, which is a problem for many millennials who move more frequently than the older generations. When housing prices were more affordable, however, it was not as big a deal if you decided you needed to move or you ended up needing to move for your job. Today, with housing prices higher than ever before, buying a house and then having to move away and get another place to live places too much of a financial anchor on a millennial homeowner.
The “traditional” route of buying a home with a white picket fence to start a family is not in favor with millennials, who are—typically for financial reasons—starting families later than previous generations. Many millennials are also opting for non-traditional routes for their families, such as living in apartments, renting homes with other family members or roommates, and so on. This non-traditional path for families makes it less likely for millennials to purchase homes, even if they plan on adding children to their family in the future.
Buying a home involves so much more than the cost of the home itself. You must pay for plenty of upfront costs (like a down payment), not to mention costs for property taxes and insurance, home owner’s association fees, and of course the cost of regular maintenance, upkeep, and repairs. Renting a home or apartment, on the other hand, takes almost this entire financial burden away—millennials who are renting are only responsible for rent and related utility fees rather than a pile of bills that only add to their already strained incomes.
It doesn’t seem that the trend of millennials renting over buying will dissipate anytime soon. The current financial market and the overall income trend for millennials are pushing them towards more affordable and convenient rentals over homeownership. As long as the careers are in high-cost business centers this trend will continue. There are an array of reasons millennials are choosing to rent over buying a property, but most of it is associated with the rise of property and the inability of younger generations to pay the high-cost.