Housing trends among Millennials are complicated beasts, and predicting where they are headed is tricky. This generation is beset by student debt, and many Millennials came of age during a weak job market and got spooked by a housing crash. Yet the 35-and-under set now makes up the largest share of home buyers, according to the National Association of Realtors.
When NAR chief economist Lawrence Yun asks What the Future, he is concerned about the high price of housing in fast-growing, high-wage cities and its dampening impact on attaining the American Dream. He knows that in most parts of the country, resident backlash can trump new development that might help bring down costs by adding much-needed new units. He is especially curious if there are some new approaches that might turn the not-in-my-backyard residents into proponents of new development. He posed a hypothetical situation to Ipsos. GenPop discussed the findings with him.
GenPop: Your first question was about Millennial housing desires. What did you think of the results?
Lawrence Yun: [The results] were not surprising and are encouraging. People still view owning a property as their aspiration. More than 80% desire to own a property at some point.
GenPop: Millennials have been slower into the housing market than previous generations. To what degree do you think this data shows there are more economic challenges than aspirational ones?
Yun: The data shows that the aspiration to own is clearly there, which implies that it’s financial barriers that are holding back the buying of property – whether it’s student loan debt, which has tripled in a 10-year time span, or the high housing costs that make it difficult to save for a down payment, and higher home prices that make it difficult to get a mortgage. The data is strongly suggesting that people have a preference to buy, but it’s the financial barriers that prevent the realization of their dreams.
GenPop: What does that say about the future?
Yun: These high costs might fundamentally change people’s view about their desire to own in the future. The aspiration numbers today are encouraging – let’s hope they remain as such – but they could change if people believe it will become nearly impossible to attain their dream.
GenPop: The second part of your question was about incentivization. You asked if developers could gain support for a real estate project by providing some sort of trade-off to residents. It’s more typical to see the developers receiving incentives from a city than residents receiving a direct incentive – yet residents are the ones who have to deal with construction and day-to-day changes associated with the new property. Ipsos created a hypothetical and did a three-way split of the sample to test out not just the idea of incentives but different levels of reward. What did the results tell you?
Yun: Historically it’s the existing residents who have the power through the ballot box and the local land-use regulations. Often it is the NIMBYism that has won out. The conversation has to be changed. The existing local residents can’t have this major veto power. This is one way to have the conversation about building homes because building is needed. Americans are facing a housing shortage in many markets so the fact that people are at least willing to discuss Y(es)IMBYism I think is a very good start.
Another part that was encouraging was about the Y(es)IMBYism – provided that they get something in return, whether it is a property tax break or a gift card – people are willing to say, “Yes we need to build more.” I think this is the major hurdle and obstacle that American big cities are facing where the job market is good but people are shy about moving to a job-creating region because of lack of homes available or very pricey homes. The way to relieve some of the price pressure is to build.
GenPop: What surprised you in the data?
Yun: The fact that people were willing to say “yes” for some consideration. The reward amount was much lower than I imagined it to be, but of course this was a hypothetical question.
GenPop: We have some data on personal incentives for moving, as well. Livability.com did a survey with Ipsos that showed people would be more willing to relocate if the incentives were right. Do you think this could translate?
Yun: There’s a large degree of employment inefficiency. For instance, if more software engineers moved to a place like Seattle, that would be a great thing. Yet they do not or they cannot because of housing costs, which leads to inefficiency of human capital.
GenPop: How do you expect these results will change?
Yun: I think we’ll need greater dialogue. We need to be asking the question more. The initial answer might be “no” but we could possibly make it into “yes” if we consider new incentive structures. It brings greater dialogue and makes people think in terms of trade-offs greater than just simple “yes” and “no.” This is one way to possibly overcome the very powerful forces of NIMBYism.
Lawrence Yun is the chief economist and senior vice president of research for the National Association of Realtors.