Millennial Renters are Essential to Small Property Apartment Demand

In this closer look at Millennial renters, we find they are well-represented in small, low-amenity properties.

Developers and investors typically think of Millennial renters as determined to live in large, high-rise properties in urban cores. This new generation of renters prioritizes walkability and access to both in-building and local amenities. While this characterization may be true of many young renters, a closer look at the data shows they are an even more important source of demand for apartments in smaller properties.

Do Millennials Renters Live in Small Properties?

• Consistent with generally-held views regarding younger Americans’ housing preferences, Millennials (here defined as individuals currently between 18 and 34 years of age) tend to be renters. As of Q2 2016, the rentership rate for this cohort, including all living arrangements other than ownership, was 65.9 percent according to the U.S. Census Bureau.
• While Millennials account for 23 percent of the total population, they are a significantly larger share of the renter population. As shown above, Millennials accounted for 38 percent of the nearly 28 million renters in small properties in 2014. In comparison, their share of the large property renter population was lower, at 32 percent.

What do Millennial Renters Do?

• The basic activity profile of Millennial renters is similar across small and large apartment buildings. As shown above, nearly 85 percent of this age cohort work in salaried jobs. While some overlap, 25 percent worked and also attended college or university programs. Just 3 percent of Millennials living in apartments reported being self-employed in 2014.

How Much Do They Earn?

• The annual income of Millennial renters tracks fairly consistently with their level of educational attainment. More educated Millennials command higher salaries.
• Of course certain markets have higher-earners — we already saw that nearly 8 percent of Millennials in San Francisco earn more than $350,000 annually.
• There are also significant income differences across small and large properties at the same education level. Millennials with college degrees living in small buildings have lower incomes than their similarly-educated counterparts in larger properties.
• As shown above, Millennial renters in small asset buildings with college or associate degrees earned about $34,000 annually, compared to $43,000 earned by those living in large properties. This difference is even wider at higher levels of education.