Younger Americans Face a Housing Affordability Crisis Amid Growing Wealth Gap
Younger Americans today are confronting a severe housing affordability crisis. The median age for first-time homebuyers has risen to about 40, compared to roughly 29 in the 1980s. Additionally, the cost of first homes has roughly doubled when adjusted for inflation compared to previous generations. This has led to a significant wealth gap between renters and homeowners, where rising home prices are enriching current owners and effectively locking out new entrants, hindering asset accumulation among younger generations.
The crisis reflects a perceived broken social contract. Baby Boomers remain the wealthiest generation but are leaving Millennials with a far worse economic inheritance. Public programs such as Social Security and Medicare face potential strain as younger cohorts will rely on them in the future, with public finances expected to be severely overextended by the time Millennials reach retirement.
A study by Northwestern and the University of Chicago projects that Millennials born in the 1990s will retire with home-ownership rates approximately 9.6 percentage points lower than their parents. Millennial homebuyers also carry roughly three times the student debt compared to Boomers at the same age. This is compounded by public universities having become four times more expensive after adjusting for inflation.
Historical economic mobility has declined. In 1940, there was a 90% chance of earning more than one’s parents, but that has now fallen to roughly even odds. Attempts to mitigate the housing crisis, such as a proposed 50-year mortgage plan by the Trump administration, were abandoned amid criticism that such long-term debt would extend beyond typical lifespans and complicate homeownership.
A personal account highlights the challenge: a 35-year-old living near New York City pays about $27,000 annually in rent, gaining no home equity or assets, illustrating the 'rent trap' many face today.
