There was a time, not so long ago, when recent college graduates dreamed of a mortgage on a starter home replete with granite-topped kitchen counters and a few bedrooms to grow into. Remember when “cocooning” was all the rage?
How quaint. With an uncertain economy, the rise of social networks that redefine “community,” and more people moving to take jobs where they can find them, renting rules the Millenial generation. The new dream? A no-frills apartment in one of the new “destination living” communities, lush with multiple swimming pools, chain restaurants, and volleyball courts.
For the first time since Herbert Hoover pushed homeownership as a way of staving off communism’s Red Menace, owning has lost its luster for the young. Since 2008, when the economy faltered, the percentage of young people who think that owning a home “is without a doubt always better than renting” has fallen by several percentage points, according to study (PDF) released in October by the Center for Behavioral Economics at the Federal Reserve of Boston.
Renting, it seems, once the province solely of the disenfranchised, has acquired a sort of cool respectability. Empty nesters got the same religion a couple of decades ago, when droves of them began cashing out of their high-maintenance houses, but the embrace of young professionals is a postrecession phenomenon. For developers, says the futurist Richard Florida, whose most recent book is The Great Reset: How New Ways of Living and Working Drive Post-Crash Prosperity, “multifamily is the only game in town.”
Some of the forces driving the change are cultural. “People are getting married so much later,” says Lucy Crow Billingsly, a Dallas builder whose father was real-estate tycoon Trammel Crow. “They travel light longer. Now what they think of as assets are their Facebook platforms, the far-off countries where they’ve vacationed lately, their clothes, and their tattoos.” Billingsly has been a prime mover of the trend; among her properties is “Austin Ranch,” a 3,000-unit planned community with retail in North Dallas, where 75 percent of the residents are under 40, a majority unmarried. “We have more dogs here than children,” she says. With occupancy rates of 95 percent, Billingsly has been able to raise new rents by 15 percent this year.
“It’s sort of urban and sort of suburban at the same time,” says Keri Walsh, a 28-year-old teacher who’s lived in an $850 one-bedroom at Austin Ranch with her beagle for four years. She moved to the Dallas area from the outskirts of Boston soon after college. Raised on Friends and Seinfeld, far from the trim center-hall colonials of Leave It to Beaver or Father Knows Best, her ideal is a leisurely mortgage-free postcollege life hanging at the pool with pals.
A grim reality, of course, lurks beyond the outdoor sculpture and bars serving frozen margaritas: the young also gravitate to renting because mortgages are hard to come by and foreclosures blemish the landscape. No one wants to get stuck with a house or condo they can’t sell when there’s a job offer 2,000 miles away. Walsh says she thought of buying a townhouse condo, but then looked at the resale numbers, even in the Dallas area, which has been less hard hit than many by the economy. “There’s no stigma to renting anymore, and there’s just so much to keep you interested and busy here,” she says.
Businesses have sprung up to cater to the new market, including TUI Lifestyle, which will fully deck out your apartment with one of a dozen “collections” of fashionable modern furniture and accessories, down to the end-table lamps, delivered anywhere in the nation within 72 hours. Remodeling may have become a national obsession in the pre-2008 world, with even the young jumping into the DIY craze, but when house prices began their fall, the fixer-upper quickly became an albatross in the eyes of the young and unemcumbered. Harvard University’s Center for Housing Studies released a report last month that said the market for home remodeling had essentially entered its own double-dip recession. “Young people haven’t internalized their parent’s ideal of homeownership as a surefire investment. They have a different experience that’s been validated by the economy,” says Florida, a professor at the Rotman School of Management at the University of Toronto.
At this point, only families with children seem bound to the single-family homeownership model. In that stage of life, school districts and continuity become crucial. But there may soon be more economically viable ways to live in such a setting, Florida says: “Smart developers see that it makes sense to buy up single-family homes in decent school districts and rent them out. That way people can transition from their apartment in an extended adolescence paradise like Austin Ranch to a rental house nearby in a place with good schools.” If they like the community and the market stabilizes, they can then buy a home there, he adds.
At the height of the homeownership craze in 2006, nearly 70 percent of Americans owned their own dwelling; since then the number has fallen to about 65 percent. In Florida’s calculus, a healthy owner-renter split is about 55-60 percent owners and 40-45 percent renters, “which is what you see in really vibrant creative cities like San Francisco or Portland.”
Jose Castro, 30, is just the sort of new-wave renter that Florida is referring to. He runs his concrete fabricating company out of his apartment at Austin Ranch. Within a couple of years he intends to decamp for either San Diego or San Francisco. He's a self-proclaimed disciple of lifestyle guru Timothy Ferriss; a few years ago when the author eBay-auctioned a first edition of his 4-Hour Workweek, Castro won it for $2,500 and traveled with Ferris to the Vietnamese orphanage that got the proceeds. One of the benefits of renting a small apartment is that “you accumulate less stuff,” he says. “I think the less you have, the more imaginative and mobile you are.”