TIME Research

Millennials Now Have Jobs But Still Live With Their Parents

Young woman working with laptop at home
Getty Images

A Pew study finds the perplexing pattern has affected the housing industry

Halfway through this decade and nearly seven years after the Great Recession, Millennials are bouncing back—sort of.

In a new study released by Pew, researchers find that while Millennials—people who were born after 1981—are back to the pre-recession era unemployment levels of 7.7%, they haven’t been able to establish themselves as adults in other ways, like owning a home or getting married.

Richard Fry, an economist and lead author of the study, describes the situation as Millennials’ “failure to launch.” “I think the core is a bit of a puzzle with one clear consequence,” Fry told TIME. “There’s good news: the group that was hit the hardest—young adults—are now getting full-time jobs and earnings are tracking upwards. But the surprise is that with the recovery in the labor market, there are fewer young adults living independently.” (Living independently here is defined as heading a household; in other words, owning a home.)

When the recession hit, young people moved back into their parents’ house in droves, unemployed and without much hope for any future work. The thought process was that once the economy improved and Millennials returned to work, they’d scoot out of their parents lair.

But that hasn’t been the case, and economists aren’t sure why.

“Is it a good thing or a bad thing? I don’t know,” Fry said. He was also the author of a study three years ago that explored Millennials living and work situations using 2012 data, and he thought then that the explanation was clear. “My thought was, ‘Yeah, that’s true, the job market is crummy,'” he said. “My expectation was that as the labor market improves, more young people will strike out on their own, but that’s not the case.”

About 42.2 million 18-to-34 year olds are living away from home this year; 2007 numbers were just above 2015’s independent young adult population at 42.7 million. There are a few common characteristics of these Millennial householders; they are more likely to be women (72% compared to their male counterparts) and college-educated (86% of those with bachelors degrees were living independently compared to 75% of the same peer group holding only a high school education). Fry points to women getting in permanent romantic relationships earlier that either lead to marriage or cohabitation as the cause of this gender difference.

The consequences of Millennials still living at home go far beyond the household dynamics of adult children being at home with parents. Consider the housing sector, which has not recovered from the 2008 economic tumble. If more young adults had decided to take on home ownership, the economy may have improved more.

So how are Millennials most likely living if they’re not living at home? Probably with a roommate, or doubled up with a fellow adult who is not their spouse or partner, data suggests.

But having a roommate or living at home have real demographic effects for the future, Fry says. He goes back to two key facts: that people living independently tend to be better educated and that college educated people tend to delay marriage or not marry at all (though even Millennials with a high school education are not getting married as much as they used to.) That means that less educated Millennials are facing consequences in not just the job market, but beyond.

“There’s less sorting—that when the less educated do marry, they marry others who are also less educated,” he said. “That’s going to impact household income and economic wellbeing. That’s going to affect economic outcomes.”

TIME Economy

Why Your Rent Increases Are About to Get Steeper

Only 6.8% of apartments are vacant — the lowest in 30 years

Landlords will almost always remember to increase your rent each year. Maybe it’s just a few percent, maybe it’s a few hundreds of dollars. Or you may be one of the lucky few not to see your rent jump. Whatever it is, enjoy it while it lasts — it’s only getting worse.

Rent increases are expected to get steeper with the rental vacancy rate hitting a 30-year low of 6.8% this quarter, the U.S. Census Bureau announced on Tuesday. That means about 93.2% of America’s rental housing units are rented out — a level of demand the nation hasn’t seen since 1985. As a result, economists predict rent increases are “set to accelerate” to about 5% this year and the next, marking one of the highest periods of rent growth on record, according to Bloomberg News.

The upside, however hard to see, is that it might be time to consider actually purchasing an apartment or house. That could also help lift up a flagging homeownership rate, a trend tied to all sorts of economic woes.

MONEY housing

U.S. Homeownership Drops To Its Lowest Level Since 1967

aerial view of neighborhood
Jake Wyman—Getty Images/Aurora Creative

The last time homeownership levels were this low, LBJ was president.

Data released by the Census Bureau on Tuesday reveal that the U.S. homeownership rate stood at 63.4% for the second quarter of 2015. The rate is down slightly compared to the first quarter (63.7%), and it represents the lowest level of homeownership in America since 1967. If the homeownership rate drops just a few more tenths of a percentage point, it would reach a new all-time low since the government began tracking such data in 1965 and the rate was a flat 63%.

In fact, some housing experts say it’s fairly likely the homeownership rate will continue to fall and will indeed hit a record low in the near future. “We may have another percentage point to go before we see a bottom” in terms of the homeownership rate, Mark Vitner, senior economist with Wells Fargo Securities, told Bloomberg. “We’re still suffering the effects of the housing collapse and the financial crisis.”

The bull market and an improving jobs picture would seem to bring with it rising homeownership levels. Yet as a recent Harvard study pointed out, many would-be homeowners—particularly younger ones, in their 20s, 30s, and 40s—are still struggling in the aftermath of the Great Recession. Wages have been stagnant for the middle class, and many households are cautious about jumping into homeownership in the face of hefty student loan debt and memories of being burned in the housing crash. Rising home prices don’t help ownership levels either.

All combined, these forces are conspiring to make renting seem like the wiser option over buying lately.

For the sake of comparison, the 50-year average for homeownership in the U.S. is 65.3%. The rate rose through the 1970s and early 1980s, before dipping to around 64% or slightly under in the late ’80s and early ’90s, a period marked by economic downturn in much of the world—and a recession that lasted eight months in the U.S.

Fueled by easy credit, a booming economy, and boundless optimism, the homeownership rate soared in the late ’90s and early ’00s, nearly hitting 70%. The 69.2% homeownership rate of 2004 is currently the all-time high. Based on how things have been going, it very well could remain as the record high for years or even decades to come.

TIME housing

Here’s Why the Real Housing Recovery Is Just Getting Started

Construction At A Toll Brothers Development Ahead Of Housing Starts Figures
Bloomberg—Bloomberg via Getty Images A worker builds a new Toll Brothers home.

Home builders are busier than they've been in years.

The year of the construction boom just got even better for American homebuilders.

The Census Bureau and the Department of Housing and Urban Development announced Friday morning that builders launched new housing projects at a seasonally-adjusted annual rate of 1.17 million in June — that’s up nearly 10% from May, and 27% from June 2014. The rate is also just shy of the eight-year high of 1.19 million set in April.

The numbers were driven by a big increase in multi-family construction, as housing starts of single-family homes actually shrank by 0.9% in June. As you can see in the chart below from Calculated Risk, the housing construction recovery has been dominated by the construction of apartment buildings, reflecting a shift in demand for urban over suburban housing, and the fact that the recession has made it difficult for many Americans to qualify for mortgages to buy a home.

But even if many Americans aren’t able to buy homes, they still need somewhere to live. In the years following the real estate bubble, data suggested that Americans were increasingly doubling up, and living with friends and family rather than starting households of their own. Now that trend appears to be shifting, with more recent data showing stronger household formation that at any time since the housing crisis.

Although more data will be necessary before we can declare the housing construction slump officially over, 2015 is shaping up to be a great year for builders.

StartsJune2015

 

TIME United Kingdom

Watch This 20-Year-Old Legislator Completely Own the U.K. Parliament With a Dazzling Speech

So what were you doing at 20?

At 20 years old, Mhairi Black may be the youngest lawmaker in the U.K. Parliament since 1667, but she has already shown to her peers in the House of Commons that when it comes to issues of social justice, she will pull no punches.

In her stunning debut speech Tuesday, the Member of Parliament for the Scottish constituency of Paisley and Renfrewshire South attacked the government for rising poverty levels, the reliance on food banks and cuts to the welfare system.

Black, who has just graduated from Glasgow University, said Britain had “one of the most uncaring, uncompromising and out-of-touch governments that the U.K. has seen since Thatcher.”

She called out the chancellor George Osborne for abolishing housing support for under-21-year-olds, saying that, “We are now in the ridiculous situation whereby, because I am an MP … I am also the only 20-year-old in the whole of the U.K. the chancellor is prepared to help with housing.” (British lawmakers who do not live in London get housing subsidies from the government.)

Black’s Scottish National Party won an unprecedented number of seats in May’s general election, and she lambasted their political rivals, the Labour Party, for forgetting “the very people they are supposed to represent.”

She ended her rousing speech by calling on all the parties of the opposition to work together to “be the signpost of a better society.”

 

TIME housing

San Francisco Revamps Airbnb Regulations

Investors love Airbnb, but the reaction in its own backyard has been mixed.

The hometown of accommodation-sharing website Airbnb has come to a tentative resolution in a long fight over how often people can rent out their houses and apartments online.

After multiple rounds of debate over 60-day, 75-day and even 120-day caps on rentals, the San Francisco Board of Supervisors voted Tuesday to keep the current 90-day cap in place when the host is not present and allow unlimited days when the host is present.

The fight is far from over, however, with one supervisor even calling the vote “somewhat moot.” Earlier this week, a measure qualified for the November ballot that would cap both hosted and unhosted rentals at 75 days per year. The initiative would also require platforms to list only hosts who have registered with the city, a tenet of the current law that has been largely ignored by local hosts. The measure has been labeled as “anti-Airbnb.”

The debate is not just a local skirmish. Airbnb has faced concerns from lawmakers in New York as well, while cities across the country have debated limitations and even bans on companies like Uber, a ride-sharing app, as local governments struggle to update long-standing regulations in light of new technology.

The new San Francisco ordinance, which passed in a 6-5 vote, will create what supporters call a “one-stop-shop” office to handle issues related to short-term rentals, whether that’s getting through the registration process or handling neighbor complaints.

While investors love Airbnb, the reaction in its own backyard has been mixed.

The city is in the midst of a housing crisis. While some locals have been evicted from their homes by landlords hoping to rent them out on Airbnb full-time, others have testified that they’ve only been able to stay in their homes because of the extra income home-sharing has afforded them. An extensive report on the issue by the San Francisco Chronicle found that more than 150 homes seemed to be rented full-time on the platform, suggesting that might be stock taken out of the strapped rental market.

During the meeting, supervisors debated when private companies should be asked to share data and when participation in new economic opportunities turns an activity like driving or sharing an apartment into a business. “I do believe that home-sharing is here to stay, and we should support appropriate and responsible home-sharing in San Francisco,” said Supervisor Mark Farrell, who sponsored the new ordinance with San Francisco Mayor Ed Lee. “But we must protect our city from turning into a city solely of short-term rentals.”

Farrell, and other city lawmakers, cautioned against deciding this issue by ballot, because after a law is put in place that way, officials must return to voters in order to make any changes to it. He said that the economy and business models are changing too rapidly to put such a high bar in place for updating related laws. “We’re in the top of the first inning here,” he said.

MONEY home prices

Real Estate In This NYC Neighborhood Is Worth More Than All of New Hampshire’s

Brownstones on the Upper East Side, New York City.
Patti McConville—Alamy Brownstones on the Upper East Side, New York City

And a bunch of other states' too.

New Yorkers are known for their not-so-subtle indifference to the rest of country. Just think of that famous cartoon, where beyond the Hudson River, a featureless expanse fades into the the Pacific Ocean and a distant sliver marked Japan.

When you view the country through the lens of real estate values, New Yorkers’ view seems crazily close to the mark, at least according to data compiled by Metrocosm, a website run by real estate researcher and New Yorker (of course) Max Galka.

According to Galka’s calculations, New York City’s 305 square miles, which amount to less than one one-thousandth of the nation’s land mass, are valued at about $1.5 trillion, 5% of the $33 trillion value of the entire nation’s real estate.

Looked at another way, only three states beside New York State itself—California, Florida, and Texas— have total real estate values higher than Gotham’s.

The Upper East Side, essentially a handful of tony blocks adjacent to Central Park, is itself worth about $96.5 billion, according to Galka, more than several states including New Hampshire, South Dakota, and Wyoming. The Upper West Side, home of the famous Dakota apartment building (where John Lennon lived and Rosemary’s Baby was set), is worth more than all the real estate in either of the actual Dakotas.

Overall, Manhattan real estate is worth about $733 billion, in line with all the properties in Ohio, Michigan, and Georgia.

TIME Money

How Rich Immigrants Can Solve L.A.’s Housing Crisis

house-white-wall
Getty Images

Zocalo Public Square is a not-for-profit Ideas Exchange that blends live events and humanities journalism.

If the city wants affordable homes, it needs to tap into funds from wealthy foreign investors

How could Los Angeles pay for more affordable housing?

One answer is money from wealthy immigrants.

To build apartments that are accessible to low-income residents, high-rent cities across the country—from San Francisco to Miami—have been tapping funds from EB-5, a federal government program that offers U.S. green cards to foreigners in exchange for investments in U.S. businesses. Launched in 1990 as a vehicle to create jobs, the program requires each investor to give at least $500,000 to a business that provides 10 full-time jobs to Americans. The investment is “at-risk,” so there’s no guaranteed return.

As an immigrant, a former securities lawyer and the founder of a business, I immediately found EB-5 compelling, and have worked to spread the word about its advantages and make it more transparent. I’ve created EB5 Investors Magazine, EB5investors.com, and a series of educational EB-5 conferences.

But the program was rarely used and little known until the Great Recession hit and traditional sources of capital dried up. Since then, real estate developers have embraced EB-5 funds from foreign investors around the world as an alternative for financing all kinds of construction projects, including buildings that contain affordable housing units. EB-5 funds helped build 115 affordable units at Stadium Place, an office-hotel-retail-residential project located in front of the Seattle Seahawks stadium. San Francisco’s massive Shipyard development in Bayview-Hunters Point, one of the poorest sections of the city, includes several hundred million dollars from individual EB-5 investors. As part of its negotiation with the city, the Shipyard developer pledged to devote 30 percent of its planned 10,000 units to affordable housing. And last month, Miami Mayor Tomas Regalado said that his city plans to target EB-5 immigrant investors as a source for financing an ambitious agenda to build affordable housing.

Like Los Angeles, most of the cities that have benefited from EB-5 appear toward the top of “least affordable’’ lists of U.S. cities. They all have large populations of homeless people, although Los Angeles has the highest number. (The homeless population in L.A. County grew by 12 percent in the past two years; the number of tents, vehicles, and homemade shelters being used as housing jumped 85 percent.)

But Los Angeles hasn’t cultivated EB-5 projects that involve affordable housing. Instead, L.A. developers with EB-5 have focused on building hotels – an easier route when you have to show job creation. Flag hotels in big cities are also easier to “sell” than low-income housing with migration agents in China who connect potential immigrant investors with projects. Of course, San Francisco and Seattle projects face the same reality and have gotten deals done. That suggests that developers here need a nudge to be more creative; one nudge might involve some form of city incentives.

Yes, there are challenges. Real estate developers, will tell you that affordable housing—defined as housing priced for people making less than 50 percent of a community’s median income—is notoriously difficult to greenlight because it is perceived as unprofitable. But what they don’t understand is that the use of EB-5 funds can help developers overcome that hurdle.

The big advantage for developers is that EB-5 funds are relatively cheap capital. Most EB-5 investors want to immigrate to the U.S. to raise their families, send their children to American universities, and take advantage of the entrepreneurial opportunities. A large return on investment is down the list for these immigrants. That translates into reduced demand for a high rate of return, which ends up costing the borrower less.

Another advantage: developers don’t have to put as much cash into projects, because of the lower proportion of equity in most EB-5 deals. In a typical deal using EB-5 funding, the developer maintains equity amounts equal to between just 15 and 25 percent of the total project cost.

Los Angeles affordable housing advocates would do well to look into EB-5 funding as an alternative source for financing mixed-use projects that include affordable and workforce housing. The money is there. Investors from China, Latin America, Europe, and the Middle East already have invested billions of dollars of capital through the EB-5 program with the hope of raising their children in the U.S. What better way to use wealthy investors’ funds than by helping to finance the construction of housing for middle and low-income Angelenos?

Ali Jahangiri is the founder of EB5 Investors Magazine and EB5Investors.com, a platform allowing investors to communicate directly with attorneys, and developers to connect with EB-5 regional centers and funding sources.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

TIME housing

It’s Getting Harder For the Middle Class to Pay The Rent

Bidding Wars Break Out In U.S. As Supply of Homes for Sale Shrinks
Bloomberg—Bloomberg via Getty Images A for rent sign stands in front of a row house in the Logan Circle neighborhood of Washington, D.C.

They're struggling to meet their payments

One in five middle-class renting households are struggling to meet their payments, according to Harvard’s The State of the Nation’s Housing 2015 report released today.

Renters making $45,000 to $75,000 a year have been deemed to be “cost-burdened,” meaning those households are spending more than 30% of their income on rent. In cities such as New York and San Francisco, which are notorious for their skyrocketing property prices, more than half of middle-class renters faced “disproportionately” high payments, the report shows.

The findings coincide with the release of data concerning homeownership rates, which have fallen over the last eight years. “The trend does not appear to be abating,” said Chris Herbert, managing director of the Joint Center for Housing Studies, which released the data on home ownership. More people are turning to forking out monthly rents, the report said: the number of new rental households has increased by 770,000 annually since 2004, making 2004 to 2014 the strongest 10-year stretch of rental growth since the late 1980s.

The decline in home ownership is being driven by such factors as rising prices, stagnant incomes, tougher lending standards, and a lack of housing, the report said.

As more renters enter the market, rental prices are rising fast, and the average household can’t keep up. A report by the New York Times details this trend in worrying fashion: last year, rents rose at a 3.2% rate, more than twice the pace of overall inflation.

“It’s more of a new normal,” said Nobel laureate and Yale economics professor Robert J. Shiller in the Times article. “We went through a wrenching experience with the biggest housing bubble and the biggest collapse since 1890. This is an anxious time.”

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