Millennials Dominate Rental Demand as Gen Z Looms
- Millennials constituted 31% of U.S. renters across age segments and housing types, while adult Gen Z renters made up 6%, according to the 2018 American Community Survey data.
- Millennial demand was most concentrated in small multifamily, where the cohort made up 46% of adult renters.
- Gen Z’s impact is increasing across all segments of rental demand.
Millennials Form Bedrock of Multifamily Rental Demand
Multifamily rental demand is undergoing a multi-generational transformation. Millennials are aging and forming families, pushing them toward more spacious housing options. Meanwhile, baby boomers and seniors are increasingly willing to downsize and adopt an urban lifestyle. The next prominent trend, of course, is the emergence of Gen Z: both the youngest cohort and arguably the most distinct.
Using the Pew Research Center’s age group classifications, Gen Z includes individuals born in or after 1997. The first few members of this cohort began entering adulthood in 2015. Pew research indicates that there are, unsurprisingly, many similarities between Gen Z and their Millennial predecessors.
Both generations broadly accept diversity and share similar environmental concerns. Having grown up during the digital age, Gen Z is tech-forward and is on track to become the most well-educated generation to date. Gen Z exhibits many of the same attitudes and skills as the millennials, just to a heightened degree. As a result, Gen Z appears well suited for urban living and should support multifamily demand over the next decade.
Gen Z’s impact on multifamily will likely grow in the years ahead. Through 2018, Gen Z adults accounted for just 6% of the total U.S. rental population. Including those below the age of 18, the share rose to 32%. Millennials remained the single largest adult renter group, representing 31% of all renters, followed by boomers and seniors, together at 19%.
Gen Z Share Rising Rapidly
When looking solely at adult renters, millennials made up the dominant share of demand across all property types. Millennial shares peaked in small multifamily properties, accounting for 46% of this group. For both large multifamily and single-family rentals (SFRs), millennials made up about 40% percent of the adult renter population.
Gen Z made up 8% of all adult renters in small multifamily, 6% in large multifamily and a relatively higher share of 9% in SFRs. As Gen Z enters adulthood, its demand share is increasing rapidly. Between 2016 and 2018, Gen Z captured an additional 5.2% and 4% of adult rental demand in small and large multifamily properties, respectively.
Over this period, except for millennials in large multifamily, the share of all other groups declined. While still in its infancy, Gen Z is emerging as a market-driving force.
In attracting Gen Z renters, operators should consider integrating technology across a range of services to modernize the renter experience. Younger renters are emphasizing value considerations into their rental criteria, and efforts to increase building-level environmental and sustainability performance could go a long way.
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Note: All data is sourced from the 2018 American Community Survey (ACS), unless otherwise stated. ACS statistics are sample-based estimates of the compositional profile of the total population in the given year of data collection, and include a margin of error. Small multifamily, based on the ACS data, is defined as structures with 5 to 49 units.