Regulations keep homeownership out of reach for young Americans
Housing policy reforms are urgently needed to place homeownership back within the reach of younger adults.
As the cost of living continues to soar, homeownership is increasingly out of reach for many young Americans. The Consumer Price Index, a widely used measure of inflation, rose to 9.1% in June to reach the fastest year-over-year increase since November 1981. Rapid inflation, combined with interest rate hikes intended to slow its growth, has pushed the cost of homeownership to record highs. But these recent trends are just exacerbating longer-term causes of home price increases: inadequate supply and excessive regulatory costs, particularly in high-demand coastal metros where young people prefer to live. Housing policy reforms are urgently needed to increase the supply of housing, reduce the burden on American households, and place homeownership back within the reach of younger adults.
A confluence of supply chain disruptions, rising interest rates, and a persistently inadequate supply of housing units has thrown the housing market out of balance. While monthly mortgage costs have traditionally been lower than monthly rents, that calculus has started to change. This is especially true for young, first-time homebuyers who typically make smaller down payments, which result in higher monthly mortgage costs. According to data from the National Association of Realtors, the median down payment of buyers between the ages of 23 and 31 is 8% of the purchase price. The median among all home buyers is 13%, but older homebuyers can often afford much more.
Data provided by Redfin, a national real estate brokerage, suggests that average monthly rents rose by 14 percent in June compared to the same month last year. Over that same period, the average monthly mortgage payment for new homebuyers jumped by 51%, primarily driven by rising interest rates and sustained home price growth. With monthly mortgage costs outpacing rent, it may now make more sense––at least in terms of monthly expenses––for many Americans to rent than to own. For homebuyers with an 8% down payment (the average among the millennial cohort), the average monthly mortgage cost was $2,358, compared to the average monthly rent of $2,016. In June of last year, average monthly mortgage costs with an 8% down payment would have been $206 less than the average rent.
Figure 1. Average Monthly Rent vs Mortgage Costs

Of course, national averages only tell part of the story. Rents, home prices, and composition of the housing stock vary considerably across metropolitan areas. For example, the monthly cost difference between renting and owning in Los Angeles, California, is approximately $1,640 assuming an 8% down payment. In Dallas, Texas, the difference is only $234 per month. Meanwhile, monthly mortgage costs are actually $278 cheaper than the average rent in Cincinnati, Ohio, according to the Redfin data.
Rising costs could exacerbate generational disparities in homeownership as millennials enter the prime homebuying age. Millennials have generally trailed behind previous generations when it comes to homeownership. A recent Apartment List report found that:
Among the oldest batch of millennials who reached age 40 in 2021, the homeownership rate is 60 percent. In comparison, 64 percent of Gen Xers, 68 percent of Baby Boomers, and 73 percent of Silents owned homes when they were the same age.
This observation is often attributed to millennials having different housing preferences than previous generations. While there may be some merit to this idea, the vast majority of millennials state a preference for owning over renting. According to the Apartment List report, only about a quarter of millennials plan to “always rent” instead of buying a home. Among those who expect to be lifetime renters, 77% cited their inability to afford a home as a reason.
However, location preferences are one generational difference that could explain some of the disparities in homeownership. Polling from Gallup suggests that younger Americans would prefer to live in the suburbs of large cities while older Americans would prefer to live in rural areas. This finding is consistent with the notion that millennials would prefer homeownership, but are unable to afford homes in the expensive metro areas where they want to live.