A decent home is affordable and provides security, wealth building, and well being. But in today’s competitive market, millennials are not finding homes that meet their needs and budget, or they’re not even looking to buy a home. According to the Washington Post, when baby boomers hit a median age of 35 in1990, they owned nearly one-third of U.S. residential real estate by value. In 2019, the millennial generation, with a median age of 31, owned just 4%. While well-to-do millennials are now engaging in the housing market, many are falling behind, and they’re concerned — some call it a crisis. What is holding millennials back and how can the housing industry best respond?
Millennial Housing Fears
We asked five millennials from different parts of the country how they’re preparing to find and buy a home for their future. When we asked about the greatest obstacle to home buying, each replied along these lines: “I don’t want a home to suck money out of my pocket” or “Upfront cash increases and interest rate changes worry me.” But the challenges of homeownership being out of reach is not theirs alone, it’s also a community’s challenge. In every city, the cost of new homes is rapidly growing out of the millennial target price range, and because owning a home is a major source of wealth building, communities also suffer economically.
Some millennials considered buying an older home but were uncertain and leery of the costs of maintaining and upgrading it. They were concerned they would not be able to afford the improvements they desired — or pay the higher energy costs of an older home. The need to know energy costs is even more important when considering buying an older home.
Oftentimes, millennials face financially stressed conditions due to college loan payments, low wages, high cost of daycare, job insecurity, the recent Coronavirus, and inflation. Even if they can afford the down payment, they may not be able to afford the full cost of ownership, which includes principal, interest taxes, insurance, energy, and repairs — or PITIER. In addition, many millennials put environmental and lifestyle concerns high on their lists. Building more affordable zero energy residences will be one way to address these challenges.
How Zero Energy Can Help
Zero energy houses, townhomes, accessory dwelling units (ADUs), tiny homes, and apartments cost less to operate while delivering the values and lifestyle that millennials often want. Factors such as no energy bills, more durability, fewer repairs, more comfort, and better health all resonate with millennials. Other benefits of well designed, energy conscious zero energy developments may include a high walk score, public parks, trails, and other public transportation options — making life easier, more pleasant, and more economical for millenials. The sense of climate responsibility demonstrated by well planned zero energy housing also meshes with the millennial mindset. To successfully meet the needs of millenials, the housing market, and the economy must adapt to the needs of these emerging demographics. Doing so will align the housing market with the economic and climate realities of the 21st century.
Savvy innovative millennials know affordability obstacles aren’t insurmountable. They are taking the journey to homeownership by looking closely at their options to reduce costs. Since millennials are less car dependent, cutting out huge transportation costs is one option. Many are looking for locations that allow them to walk, bike, or take public transportation to work. Others are looking toward shorter, or shared commutes. There is also an interest in living closer to other critical resources such as shopping, dining, recreation, and social venues. Zero energy homes may offer extra incentives to own a home that makes its own sustainable power. Many millennials are regular e-bike commuters and more affluent ones are now purchasing electric vehicles — all of which can be charged at home.
Shared Living Spaces
Several millennials interviewed explained that homeownership is possible because they are now sharing their living spaces with others or renting out a room in their home in order to make their monthly mortgage payments. Like the tiny home movement, this trend requires rethinking of living spaces, especially shared spaces, to make them as livable as possible. Amenities like extra storage space, shared garden spaces, shared workshops, and access to trails and parks, make these tighter living spaces more desirable.
Lower Energy Costs
Where do millennials stand when asked about home energy costs? In all instances, energy-saving features such as a simple change out of incandescent light to LEDs were mentioned as important and affordable first steps to saving energy costs. Millennials increasingly want information about the home’s potential energy costs. Building or buying a home with less square footage is another way to bring down energy costs. To better attract millennials, builders and real estate brokers should disclose energy use on all homes so actual home energy costs can be included when calculating affordability and the real cost of ownership. This can be done by providing a HERS index or by providing a utility billing history. A few cities now require a home energy disclosure, or HERS index, prior to selling a home, which will be a big benefit to millennial homebuyers. When energy ratings are not available, realtors can help by arranging for a home energy audit so millennials have the opportunity to incorporate energy costs into their cost of ownership calculations before closing. This also gives buyers a chance to make energy improvements and wrap those costs into the home mortgage, making them more comfortable with buying an older home.
What Builders and Communities Can Do
The millennial dilemma is a golden opportunity for the housing industry to move towards smaller, more highly energy-efficient housing. It’s also an opportunity for communities to require a high performance building code and allow smaller lot sizes, ADUs, and tiny homes, as well as offering incentives for zero energy homes.
Millennials are creatively building new paths toward ownership. Their responses highlight the importance and benefits of owning zero energy homes and residences. Because of this, building professionals, developers, realtors, lenders, and community leaders need to engage with and promote the many benefits and increased purchasing power of zero energy residences of all types. Building professionals and communities must meet the needs of millennials now — and those of future generations — in a way that will get us further down the path to zero.
