Is Generation Y a ‘Game Changer’ for Housing?
Kris Hudson | Wall Street Journal | May 15, 2013 | link
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- Generation Y’s preference for downtown living could alter the future of housing development, a land-use association says.
Many housing observers agree that Generation Y—people from 18 to 34 years of age—largely prefers downtown living, often in rental apartments with easy access to walkable neighborhoods and public transportation.
The real question is whether they’ll outgrow those tastes once they earn higher salaries and have kids.
The Urban Land Institute, or ULI, the land-use association that long has championed dense development over sprawl, this week plans to release the results of a survey of generational housing preferences, highlighting those of Generation Y. The survey, to be released at ULI’s spring conference in San Diego on Wednesday, polled 1,202 U.S. adults from Jan. 16 to Feb. 3 of this year.
ULI heralds Generation Y, with nearly 80 million members, as a potential “game changer” in the U.S. real estate market (they are also known as “Millennials”). Of survey respondents in that age range, 59% said they prefer their neighborhood to have a variety of housing types; 62% favor mixed-use developments with shops, restaurants and offices; and 52% like pedestrian-friendly neighborhoods.
In addition, 55% of Generation Y respondents said close proximity of their home to public transportation is important. The survey found that Generation Y is more likely than older generations to live in apartments and in downtowns, with 54% favoring renting and 39% favoring city living.
The thing is, while Generation Y is the most likely to move to new homes in the coming years, they’re also the most likely to go through significant life changes. Few have yet reached their maximum earning potential. And many haven’t had children, meaning they’re probably not yet focused on the quality of schools near their homes.
Patrick Phillips, ULI’s chief executive, said he suspects Generation Y is different than previous generations in that it won’t fully shift later in life to living in suburban, single-family homes. He noted that one early indicator of the longevity of Generation Y’s tastes will be apartment vacancies in the wake of the construction boom of recent years. Rising vacancies will hint that younger people are buying homes, perhaps in the suburbs. Minimal vacancy will indicate that they prefer to keep renting.
If Generation Y’s preference for compact, urban homes endures, it will result in more mixed-use development, Mr. Phillips said. “Over time, we’ll see a return to a more compact, metropolitan development pattern,” he said. “We’ll see less sprawl at the edges, the market preferring solutions that are closer in.”
Not everyone agrees with that theory. Robert Burchell, a professor of planning at Rutgers University, says that Generation Y, and even Generation X of 35 to 47-year-olds, have substantial personal debt on average and haven’t reaped the massive home-value gains that older generations did in previous booms. Thus, many younger adults likely are renting out of necessity rather than preference, he said.
“Generation X and Y cannot afford to buy the houses of the baby boomers,” Mr. Burchell said. “It’s not like this is a new generation steeped in money, ready to take on the world and has now declared ‘urban is our location.’”
Wendell Cox, a transportation consultant and demographer based in Belleville, Ill., says his analysis of census data shows that 76% of the growth in residents from 20 to 34 years of age from 2000 to 2010 came in low-density, often suburban counties.
A random selection of two Generation Y members by Developments found that neither exactly fit the results of the ULI survey. Ping Shi, a single, 23-year-old financial services consultant, recently bought a 2,500-square-foot house in south San Francisco with her parents for $750,000. She anticipates moving to the suburbs later in life.
“In my 20s, I definitely want to live downtown; I like the whole high-rise, in-the-city feel,” Ms. Shi said. “But, definitely when I have children, I want to live in a single-family home. It’s easier for parking, transportation and it’s safer to live in the suburbs away from the city. I definitely want a back yard.”
Caroline Tinsley, a 26-year-old communications specialist for an electric utility, rents a two-bedroom apartment in the Austin suburb of Bee Cave, Texas. She anticipates buying a single-family, detached home in her 30s. “I don’t want to be in the suburbs, but I don’t necessarily want to be right downtown,” she said. “I lived in the central urban area of Austin for four years, so I feel like I have that out of my system.”