Marketplace: Most Young Americans Are Rent Burdened
Release Date: October 23, 2024
Host: Kai Ryssdal
Introduction
In this episode of Marketplace, host Kai Ryssdal delves into the pressing issue of housing affordability for young Americans. Titled "Most Young Americans Are Rent Burdened," the episode explores the factors contributing to high rental costs, the impact on millennials and Gen Z, and potential solutions to alleviate this widespread economic strain.
The Current Housing Landscape
Zillow's Rent Burden Study
At the core of the discussion is a recent study by Zillow, which reveals that in 2022, 58% of individuals aged 18 to 25 were classified as rent burdened—spending at least 30% of their pre-tax income on housing. While this marks an improvement from 66% twelve years ago, the rate remains alarmingly high, reflecting longstanding challenges in the U.S. housing market.
Notable Insights:
- Kenny Lee, Senior Economist at Zillow and StreetEasy, emphasizes, "The historical undersupply of rental housing is really the problem" (09:35).
- John Campbell, a financial accounting professor at the University of Georgia, points out, "You're either a homeowner or you have money in the stock market. And if you're at this level of 18 to 25, you're neither of those things" (10:21).
Factors Driving Rent Burden
Supply and Demand Imbalance
Mitchell Hartman explains that the surge in demand since the pandemic has exacerbated the rent burden:
"Demand since the pandemic really reversed this trend, which led to soaring rents and inventory shortages, really making it difficult for local housing markets to catch up with this demand." (09:54)
Economic Inequality
As household wealth has increased, it hasn't been evenly distributed. Young adults, typically not yet homeowners or significant stock investors, find themselves disproportionately affected:
- Jordan Levine, Chief Economist at the California Association of Realtors, states, "If you pay a lot in rent, you save less. That prevents you from building up that down payment, getting into that first home, then that forever home" (10:47).
Impact of High Interest Rates
High interest rates have kept mortgage costs elevated, limiting affordability and pushing more young adults into the rental market:
- Kenny Lee notes, "Millennials had it worse because they came of age around the time of a housing market crash. Rent burdened young adults peaked in 2011, and everything was getting better. But until 2020 happened, the surging renter" (09:35).
Personal Stories: The Human Side of Rent Burden
Stacy Burnett's Son
The episode shares the story of Stacy Burnett's son, whose educational trajectory was derailed by the pandemic. Having attended school remotely, he struggled to reintegrate, leading Burnett to consider alternative career paths for him, such as becoming an electrician instead of pursuing pharmacy.
George Lee's Flooding Experience
In a broader discussion on housing, the episode touches on George Lee's experience with flooding in Queens, emphasizing the vulnerabilities faced by renters:
- After Hurricane Ida, Lee's entire basement flooded, destroying valuable possessions and highlighting the precariousness of relying solely on rental properties without adequate support or insurance (17:42).
Economic Implications
Wealth Gap Expansion
Continued rent burden among young adults contributes to the widening wealth gap. Without the ability to save for a down payment, homeownership remains out of reach, perpetuating financial instability:
- Kenny Lee asserts, "And the longer these young adults are renting and rent burdened, the wider the wealth gap becomes" (10:54).
Proposed Solutions: Increasing Housing Supply
Experts agree that boosting the supply of starter homes is crucial. By increasing the availability of affordable housing options, young renters would have a better chance to transition into homeownership:
- Jordan Levine emphasizes, "We just need to make sure that we're facilitating all of that amazing growth with the right amount of housing" (11:04).
Broader Economic Context
Federal Reserve's Role
Mitchell Hartman and Claudia Somm discuss the Federal Reserve's dual mandate of stable prices and maximum employment. Recent rate cuts aim to stimulate the economy by making borrowing cheaper, potentially aiding sectors like housing:
- Claudia Somm mentions, "Making that investment path less expensive. That could get an employer over the hump of saying, okay, well, I'll go ahead and hire two more workers" (01:57).
Challenges and Optimism
Despite positive job reports, like adding 254,000 new jobs and a lowering unemployment rate, the future remains uncertain regarding further rate cuts. Analysts like Chris Stanley at Moody's Analytics suggest that significant rate reductions may not occur soon, affecting small and mid-sized businesses' investment decisions:
- Joe Galvin from Vistage adds, "Small and mid sized businesses are waiting for that" (04:35).
Additional Content: Technology and Surveillance in Modern Spaces
Beyond housing, the episode briefly explores the integration of high-tech surveillance in sports venues, such as the Intuit Dome in Los Angeles, highlighting privacy concerns and the balance between convenience and data security. This segment, while tangential, underscores the pervasive nature of technological advancements in everyday life.
Conclusion
The "Most Young Americans Are Rent Burdened" episode of Marketplace paints a comprehensive picture of the multifaceted challenges young adults face in the housing market. From economic policies and market dynamics to personal struggles and proposed solutions, the episode underscores the urgent need for systemic changes to ensure affordable housing for the next generation.
Notable Quotes
- Claudia Somm: "Unemployment started creeping up, it started to get harder to find jobs. But what we've seen is just some reluctance to go out and hire new workers." (01:31)
- Kenny Lee: "The historical undersupply of rental housing is really the problem." (09:35)
- Jordan Levine: "If you pay a lot in rent, you save less. That prevents you from building up that down payment, getting into that first home, then that forever home." (10:47)
References
- Transcript Timestamps: Provided quotes are referenced with their respective timestamps for context and verification.
- Zillow Study: Insights derived from Zillow's research on rent burden among young adults.
This summary aims to encapsulate the key points, discussions, and insights from the "Most Young Americans Are Rent Burdened" episode of Marketplace, providing a comprehensive overview for those who have not listened to the full podcast.