2019 Study: Compared to Boomers, Millennials’ Rent Is More Affordable — But They Can’t Afford Homes

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Do millennials have it worse than past generations?

The popular narrative seems to suggest they do. Millennials have faced higher unemployment rates and higher student debt than past generations of young adults, according to a Pew Research Center report

You can also just ask millennials: in a GOBankingRates poll of 995 millennials, 68% agreed that they’re facing harsher financial circumstances than past generations

Do these financial obstacles bleed over into housing affordability? HireAHelper’s new data report explores if it’s more expensive for millennials to rent or buy a home than it was for two previous generations. 

We compared these generations, following Pew’s definition of each, by looking at incomes and housing costs during the years their cohorts were entering independent adulthood and becoming financially established, 20 years after their birth years:

  • Baby Boomers, born 1946 to 1964
  • Generation X, born 1965 to 1980
  • Millennials, born 1981 to 1996

Here’s what we found, and how it impacts millennials’ moving plans and habits.

Key Findings

  • The biggest generational jump in income was from baby boomers to Generation X. During the years each generation was entering adulthood, individual annual incomes grew by $6,180 from $21,250 for boomer to $28,590 for Generation X
  • Thanks to the Great Recession, incomes didn’t grow as much from Gen X to millennials, incomes just $4,160 higher each year during the time millennials entered adulthood
  • Overall, baby boomers faced less affordable rent prices than Generation X or millennials. Over the years that boomers entered adulthood, the rent costs were equal to 38.1% of monthly incomes. This measure decreased to 35.9% for Gen X and 35.7% for millennials
  • Buying a home is still out of reach for many millennials. Millennials face home values that are higher and incomes aren’t keeping up. During their coming-of-age years, the average home was worth 6.4 years’ worth of income on average. That’s a 15% increase from the 5.6 years’ of income a typical home was worth, on average, for boomers and Gen Xers

How Incomes Have Grown Since 1970

Compared to incomes in the years baby boomers and Gen Xers entered adulthood, incomes have grown during the years millennials have been adults. But these increases haven’t been without some stops and starts. 

From 2000 to 2010, annual incomes fell by just over $2,000 (in 2019 dollars) following the downturn of the Great Recession. While incomes have recovered since then and risen by $4,771, millennials’ higher incomes have come with costs. 

Specifically, these gains are due largely to millennials’ status as the most-educated U.S. generation to date. While earning these colleges degrees has helped this generation sustain income growth, it’s come with a cost: student debt. Millennials are twice as likely as members of Generation X to hold student debt, and owed 50% more on this debt, per Pew Research. 

Rent Is Slightly More Affordable for Millennials, Compared to Boomers

Rent Is Slightly More Affordable for Millennials, Compared to Boomers

During the years boomers entered adulthood from 1966 to 1984, a typical renter paid 38.1% of their income towards rent and utilities, on average. For a typical millennial entering adulthood, however, a smaller portion of monthly pay, 35.7%, was needed on average to cover rent and utilities from 2001 to 2016. For comparison, the same average for Gen Xers was 35.9%.

This overall trend shows that millennials generally faced rent costs that were about on par or slightly below what boomers would have paid at the same ages. But our data also shows differences even when comparing the youngest and oldest members of each generation.

Older millennials that entered adulthood in 2010 were putting more of their income toward rent at 38.5%, while younger millennials in 2016 paid just 35.4% of their income toward rent. 

…(H)ousing costs relative to income are up 14.3% for millennials, compared to previous generations…”

Older vs. younger boomers followed a similar trend. Older boomers paid rent costs equal to 39.5% of their monthly income in 1970. Younger members of this group had slightly more affordable rent, equal to 37.1% of monthly income in 1980.

Across the 15-16 year spans during which each generation was coming of age, however, millennials have generally benefited from slightly more affordable rent.

Here’s a look at how rent costs stacked up against incomes during the years that members of each generation were entering adulthood.

Buying a First Home Is More Costly for Millennials

While covering rent is potentially manageable, purchasing a home for the first time is a different story for millennials. This life milestone is further out of reach for them compared to young adults of past generations. 

Fewer millennials own a home than Gen Xers or boomers at the same age, trailing these cohorts by about 8 percentage points according to The Urban Institute.

This is gap correlates with the findings of our analysis of home affordability for each generation. We went back to 1960 and compared U.S. Census Bureau data on home values to personal incomes during the years that baby boomers, Generation X, and millennials were entering financially independent adulthood.

Here’s an overview in 2019 dollars:

Home values and affordability from 1970 to 2017

Home values have steadily increased over the years, more than doubling from 1970 to 2017. But incomes have also increased over that time. How do the two stack up?

Here’s a look at the median home values in key years when baby boomers, Generation Xers, and millennials were entering adulthood. We also calculated how many years of annual income was equal to the median home value in each year, to determine how affordable purchasing a home was. All figures are in 2019 dollars.

While both home values and incomes fluctuated for each generation, millennials are reaching adulthood at a time when buying a home is less affordable. Both boomers and Gen Xers would have had to pay around 5.6 times their annual pay for a first home, on average. 

But housing costs relative to income are up 14.3% for millennials, compared to previous generations, with a typical home value equal to 6.4 years’ worth of individual income. 

This shows that though incomes have grown and kept pace with earning benchmarks for past generations, house prices have risen faster. Other obstacles stand between millennials and their first home purchase: the burden of student debt, stricter home lending standards, and a shrinking supply of affordable housing. Overall, homeownership is far less accessible to millennials than it was to previous generations in their early years of adulthood.

Renting Is More Affordable Than Owning — But Comes With More Housing Insecurity

Overall, the answer to how millennials are faring when it comes to affording housing cost is mixed. Rents are as or slightly more affordable for millennials as they were for young adults in the boomer and Gen X cohorts. 

But homeownership is less affordable, leaving fewer millennials able to graduate from renting to homeownership. The gap in affordability between owning a home and renting only seems to be widening, too, with 82% of renters viewing their current housing situation as more affordable than purchasing a home.

Homeownership Perks Millennial Renters Are Missing Out On

Because millennials can’t make the dollars and cents of buying a home add up, they’re also missing out on the many other benefits that owning a home provides. Homeownership is a key path to wealth accumulation for Americans, for example, as they build equity. And mortgages come with a tax break while renting doesn’t. 

Perhaps just as important is that owning a home also provides more housing security, as it shields residents from the inherent unpredictability of renting. 

“While earning these colleges degrees has helped this generation sustain income growth, it’s come with a cost: student debt. Millennials are twice as likely as members of Generation X to hold student debt, and owed 50% more on this debt, per Pew Research”

While landlords can jack up rents each year, homeowners will only see increases when their property taxes are adjusted. If it rises too much, a renter might find themselves suddenly priced out of their home and forced to move to a cheaper place. 

Depending on state rental laws, renters can also be evicted even if they’re model tenants. Common reasons renters might be evicted include if the unit is going to be completely remodeled, if the landlord wants to reclaim the property for their personal residency or use, or if they plan to sell it. 

Renters’ living situations can even be complicated by their own living arrangements or personal lives. Couples who rent jointly but then split, for example, will be faced with navigating both a breakup and a move. Renters with roommates might be forced to move or become unable to afford rent if a roommate moves out or breaks the lease. 

Whatever the situation, renters often have less control over their housing situations compared to their home owning peers.

Millennials Are Moving More Than Older Generations

These aren’t just possibilities, either — it’s happening. Past reports have pointed out that millennials are moving less than previous generations at the same age. But this could reflect an overall decline in move rates across generations.

A recent moving regrets survey from Porch (which owns HireAHelper), however, reveals that millennials are live in their homes for shorter periods and move more frequently than other generations. 

Millennials report moving every two years, on average — twice as often as Gen Xers at four years, and three times more frequently than boomers who stay in a home for an average of six years. Additionally, three-quarters (73%) of millennials plan to move in the next 10 years, compared to just 58% of Gen Xers and 43% of boomers.

How Millennial Renters Can Prepare for Their Next Move

How Millennial Renters Can Prepare for Their Next Move

Millennial renters don’t have to be at the mercy of their landlords or the rental market. Looking ahead and preparing for future moves can lower the stress and costs of the whole ordeal. Here’s how to make your next move a smoother experience.

Know what’s in your lease. Your lease sets out the rules of you and your landlord’s agreement for you to rent your home. You should carefully read it and discuss any concerns before signing the lease, and review it occasionally to remember what’s in it. 

Sticking to the agreements set out in the lease is crucial; if you break the lease, you might give your landlord the cause and legal right to evict you. Lastly, get familiar with your state’s tenant’s rights laws to know what is fair and legal treatment, and advocate for yourself if your landlord is overstepping.

Keep an eye on your rental market. If you stay up-to-date on overall trends in rentals for you area, you will be better informed about how these could affect you as a renter. You’ll see if rents are on the rise or if competition for units is up. You can also research neighborhoods beforehand so you know which areas offer rentals that fit your housing needs and budget.

Save a moving fund. Even if you’re given 30 days of notice to vacate, that’s not a lot of time to save up for a big move. You also might not be able to count on getting your rental deposit back before you’ll need to put money down on your next place. So, it’s wise to have enough savings that you can cover the full costs of a move including the moving van, movers, and the first month’s rent and deposit.

Declutter regularly. Moving will be easier and less stressful if you have less stuff you have to sort through, pack up, and relocate. So get in the habit of sorting through your belongings regularly, at least once per year. Be honest about whether you need, want, or use items, and donate or throw away things that no longer serve a purpose. This gives you a chance to reorganize your remaining stuff so that it’s easier to pack and move, too.

Make your moving plan. Don’t wait until you’re priced out of your apartment to start thinking about and planning your next move! You can review our moving checklist to get some ideas about what your move could look like.

Outline your own “moving cheat-sheet” that includes the steps you’ll need to take when moving. You can even include contact details for anyone you’ll need to contact when moving, such as your landlord, your bank, the post office, or the utilities company.

Know how to get help. Renters can’t always plan the move far in advance, which might make it difficult to plan and execute a move on your own. Hiring movers can make a huge difference in how stressful your move is, and HireAHelper can connect you with moving truck rentals, movers, and packers. A Hybrid Move covers the trickiest parts of the move: you pack up your belongings, and movers will load and unload the truck.

Methodology

HireAHelper analyzed Census Bureau data over the last 60 years to generate the intergenerational comparisons in this piece. 
We followed generation definitions set by Pew, plus 20 years, to isolate the years that each generation was entering independent adulthood, as follows: Baby Boomers, born 1946 to 1964, entering adulthood from 1966 to 1984; Generation X, born 1965 to 1980, entering adulthood from 1985 to 2000; millennials, born 1981 to 1996, entering adulthood from 2001 to 2016.
For ease of understanding, all dollar amounts were converted into 2019 dollars. The census data used was from the Historical Census of Housing for home values and gross rents, for years from 1970 to 2000, and One-Year American Community Surveys by year reported, from years from 2001 to 2016.

Illustrations by Harry Woodgate

How Much Does Renters Insurance Cost?

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If the thought of another $100-plus monthly expense is keeping you from buying renters insurance, you should know a renters insurance policy isn’t likely to cost nearly that much.

The average cost of renters insurance in the U.S. was $188 a year, or just over $15 a month, in 2015 per data from a 2017 report by the National Association of Insurance Commissioners (NAIC), ranging from a high of $262 to a low of $114.

Now that you know that the cost of renters insurance is closer to a car wash than a car payment, read on to learn more about how that number is determined:

How Much Does Renters Insurance Cost in Each State?

Given that your neighborhood and building type can influence your premiums, it stands to reason the cost of renters insurance varies dramatically across state lines. Keep in mind, though, pricing gets more granular than that, and the cost of renters insurance can also vary dramatically across any given state.

With that caveat in mind, here are the average annual renters insurance premiums in each one as of 2015, per the NAIC:

 

State Avg. Annual Premium
Alabama $242
Alaska $172
Arizona $191
Arkansas $214
California $202
Colorado $166
Connecticut $201
Delaware $156
District of Columbia $158
Florida $195
Georgia $226
Hawaii $201
Idaho $155
Illinois $173
Indiana $183
Iowa $146
Kansas $177
Kentucky $172
Louisiana $249
Maine $147
Maryland $161
Massachusetts $196
Michigan $203
Minnesota $144
Mississippi $262
Missouri $180
Montana $147
Nebraska $149
Nevada $189
New Hampshire $150
New Jersey $171
New Mexico $191
New York $202
North Carolina $154
North Dakota $114
Ohio $185
Oklahoma $242
Oregon $166
Pennsylvania $156
Rhode Island $179
South Carolina $192
South Dakota $121
Tennessee $210
Texas $241
Utah $149
Vermont $155
Virginia $153
Washington $169
West Virginia $186
Wisconsin $132
Wyoming $153
United States $188

The most expensive states for renters insurance

The unifying theme here: Extreme weather. Mississippi, Texas, Louisiana and Alabama are coastal and susceptible to strong storms, while Oklahoma has a tornado problem.

  1. Mississippi: $262
  2. Louisiana: $249
  3. Alabama & Oklahoma (tie): $242
  4. Texas: $241
  5. Georgia: $226

The cheapest states for renters insurance

Conversely, the states with the cheapest renters insurance are much more insulated from extreme weather and natural disasters. Is it worth moving to cut your renters insurance rates? We’re gonna go with … no. But it’s good to know about state-by-state disparities if you’re planning a move so you can account for the cost difference in your budget, or just understand why cousin Beth in North Dakota is paying so much less to insure her apartment than you are.

  1. North Dakota: $114
  2. South Dakota: $121
  3. Wisconsin: $132
  4. Minnesota: $144
  5. Iowa: $146

What Determines the Cost of Renters Insurance?

Renters insurance provides protection for your belongings, plus some liability coverage for good measure. Renters insurance rates are determined by a few factors, some of which you can choose, and some of which you can’t.

Renters insurance cost factors that are set by your circumstances:

  • Your location: Renters insurance rates can vary widely by location (see the table below) and can even vary within cities and neighborhoods and property by property (older buildings tend to cost more, while newer buildings with more security and safety features can garner lower premiums).
  • Your credit score: Your credit score influences a lot of the rates you’ll get in your financial life, and renters insurance is among them. A good credit score is considered a sign of financial wellness and is a big factor in lowering your premiums.
  • How much stuff you have: Generally, the more value your home inventory has, the more it’ll cost to insure. We’re saying value because, while having a lot to insure generally costs more, the total price of your possessions is the real driver here. So a two-bedroom full of Ikea furniture may be valued less than a studio full of Eames.

Renters insurance cost factors that are set by your choices:

  • How much coverage you want: More coverage costs more money. If you’re willing to accept lower payouts in the event of a claim, then your premiums will be lower. And if you’re willing to gamble that your entire vintage guitar collection isn’t covered, then you’ll save some money upfront. But if you want higher coverage limits and additional riders for expensive items (and you probably do), expect your premiums to be higher than if you just had a thrift store bed and a beater guitar.
  • How high (or low) you want your deductible to be: That’s the amount of money you pay out of pocket before your coverage kicks in. The higher your deductible, the lower your premium.
  • How you want to be paid in the event of a claim: Actual cash value renters insurance will pay you the value of belongings at the time of a claim, not the price you paid for them or the price it would cost to replace them. Replacement cost renters insurance covers the cost of repairing or replacing the item at the time of the claim. Replacement cost renters insurance pays out a lot more if you need to file a claim, but it also costs more.

How Do Coverage Choices Affect Price?

Since your circumstances are generally set, it’s your choices about coverage that allow you to have some leeway over the rates you’ll get. Find out how your choices can change your premiums.

What does a basic renters insurance policy cost?

The average renters insurance policy costs between $120 and $190 a year. These basic policies generally offer $25,000 personal property coverage, $100,000 liability protection, and a $500 deductible, though those numbers are just ballpark figures and your particular insurance company’s basic coverage may be different.

Some examples of what a basic renters insurance policy will cover:

  • At least part of the replacement cost of a laptop that gets fried by a water damage from a burst pipe.
  • Some coverage for medical expenses if a friend gets hurt making a smoothie in your apartment — plus some court expenses if that friend decides to sue you.
  • Coverage for personal property that is stolen when you’re away from home.
  • If a covered event renders your apartment uninhabitable, your policy will also pay additional living expenses so you can stay in a hotel during repairs.

Check out our deep dive on what renters insurance does and doesn’t cover.

What is the cheapest renters insurance you can buy?

The cheapest renters insurance will have the least amount of coverage. If you opt for low coverage amounts for personal property (say, $10,000), personal liability ($100,000), and medical payments to others ($1,000) and you choose a high deductible ($500 to $2,500), you can conceivably get renters insurance for as little as $5 to $8 a month.

Learn more about how to buy cheap renters insurance online.

How much does more coverage cost?

As you up the coverage limits of your renters policy, you also up your premiums. But remember, renters insurance is super affordable, so even huge leaps in coverage can result in just a few more dollars a month.

For example, if you increase to the most common coverage amounts — $25,000 for personal property, $300,000 for personal liability, and $2,000 for medical payments to others — your premiums can still often be under $20 per month.

You can also purchase riders to increase your coverage for specific belongings, so if a basic policy only covers $1,000 worth of jewelry but you have a $5,000 ring, a rider could make up the coverage difference.

Riders are also available to add to your policy that cover you and your belongings in more situations. For example, renters insurance policies don’t cover earthquakes, but you can purchase a rider so that you will be covered in the event of a seismic disaster.

These additions can be as low as a few more dollars a month, or in some cases, even less than that.

Read more about popular renters insurance riders, floaters, and endorsements.

How can you save on renters insurance?

You can lower your insurance rate by increasing the number of safety and security features in your home. Many renters insurance companies offer discounts if you have one or more of the following features in your home:

  • Local fire/smoke alarms (sounds in home)
  • Central fire/smoke alarms (alerts monitoring system)
  • Automatic sprinklers
  • Fire extinguisher
  • Local burglar alarm (sounds in home)
  • Central burglar alarm (alerts monitoring system)
  • Deadbolt lock

Some companies also offer discounts if you bundle your renters insurance plan with another plan, like auto insurance, or if you pay your annual premium at once instead of monthly.

Finally, another huge way to save: increase your credit score. This one takes time, but as your score gets higher, you can get better renters insurance rates.


Colin Lalley is a writer for Policygenius, an online life insurance site with one purpose: “To get people the insurance coverage they need and make them feel good about it.”’ Please note that this editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you. 
This post originally appeared on Policygenius.

5 Ways That We’ve Added Tons of Space to Our Apartment

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When I was a renter, space was always a premium. Heck, even as a homeowner I’m still always looking for ways to sneak in some extra storage!

But even if you live in a small apartment or studio, there are ways to make the most of your space so you can live in an efficient, organized, and good-looking home. Our trick? Secret storage!

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