The Millennial Dilemma: “America Is Running Out Of Homes” Edition

NewCities published my report The Millennial Dilemma in October 2020, amidst a pandemic that compressed nearly a decade’s worth of life decisions into a matter of months. The decisions by central banks in the U.S. and Canada to slash interest rates in order to prop up their economies triggered a boom in home mortgage lending that caught some by surprise ($3.93 trillion in the U.S. in 2020 versus $2.25 trillion the year before) which in turn drove a “K-shaped” recovery leaving those at the top of the K sitting pretty with wildly appreciating assets while those at the bottom literally struggle to survive.

The Millennial Dilemma, then, is literally one of life or death – a race to acquire a homeowner’s share of the city while governments debate whether and how best to ameliorate the great divergence without rocking the boat. Naturally, these being millennials, no one quite sees it that way.

“Millennial homeownership is causing the US to run out of houses,” blared last week’s headline at Business Insider. Citing recent reports by the investment bank Jeffries and Apartment List, the story noted millennials’ homeownership rate has climbed to 47.9% from 40% just three years ago, while 30% of millennials surveyed admit the pandemic pushed them into house-hunting earlier than planned. That surge, coupled with historically low inventory of homes for sale (during a pandemic, when homeowners are loath to host open houses) and shortages of construction lumber and labor, led to the U.S. and Canada “running out of homes.”

As a result, many of the trends I identified in my report – the resurgence in starter homes, the metastasizing cancer of single-family homes for rent as an asset class, and fintech startups asking for the equity equivalent of a pound of flesh to assist with a down payment – have been turbocharged by the market. But there are glimmers of hope for millennials, too.

Many of the report’s recommendations that were infeasible in the face of a divided U.S. Congress are now on the table. President Biden’s proposed $2.25 trillion infrastructure bill includes not only includes provisions for ending exclusionary zoning and expanding affordable housing construction, but also the redefinition of child- and senior care as a form of infrastructure, including $39 billion in emergency funds for thousands of childcare providers – an absolute must for the 2 million women who left the workforce during the pandemic, not to mention a generation about to be sandwiched between the unprecedented costs of caring for their young children while tending to an elder generation whose health has been ravaged by COVID-19. Creating a national childcare program is a signature initiative of Justin Trudeau’s government as well.)

Finally, student debt relief has become a fiercely contested debate in both countries, with the progressive wings of each government calling for cancelling tens of thousands of dollars in debt as a de facto stimulus excessively burdened millennials and others. As I noted in my report, this radical proposal has been quietly endorsed by *checks notes* the National Association of Realtors as a means of galvanizing home purchases.

While it remains to be seen in what form Biden’s bill will pass (if it passes), it’s heartening to see the governments of the U.S. and Canada at last begin to grapple with perhaps the unluckiest and most misunderstood generation in recent history.