Just 13% of Millennials own their own home. Sixty-percent rent and the remaining 27% live with relatives.
Meanwhile, large numbers of unsold and foreclosed homes are sitting empty, losing value by the month, and putting a drag on the real estate market and our economic recovery.
Are Millennials the Solution to the Nation’s Housing Crisis?
I’ve written before that lack of jobs and high student debt are holding young adults back from contributing to our economy as generations before have done. While this is more a symptom than a reason for our economic crisis, Millennials’ economic well-being is essential to the recovery. While I am not normally an advocate of government spending its way to prosperity, some spending is more strategic, and dollars applied to young adults is more likely to stimulate the economy than dollars spent on older Americans.
Recently, Morley Winograd and Michael Hais, authors of Millennial Makeover, advocated for government action to translate student loans into home mortgage loans to benefit both young adults and the economy in general. Here’s the specific outlines of their proposal. (Are Millennials the Solution to the Nation’s Housing Crisis?)
Today’s housing crisis requires a radical reinvention of the basic home mortgage to be offered to those buying their first home. Under this proposal the length of the mortgage could be extended up to as many as 50 years, reflecting the increased life expectancies — and longer working careers — that most Millennials can expect to enjoy. Since no market for such debt instruments currently exists, it would be up to the federal government to create one through the process of reinsurance, just as it did in 1934.
To further encourage home buying by Millennials, the federal government should also provide incentives to financial institutions to swap out the principle of the Millennials’ student loans in exchange for a new loan, whose principal would be collateralized by the value of the real estate the former student would be acquiring. The student loan would be paid off as part of the mortgage, making Millennials better able to afford a home and freeing up additional discretionary spending that current worries over student debt curtail. Today’s lower housing prices today might make this package both attractive to investors and financially viable.
Do Millennials Dream of Home Ownership?
This plan only makes sense if Millennials actually want to own houses. I used to think Millennials had turned their backs on home ownership, seeing it as a bad financial bet and opting for the freedom, flexibility and lifestyle advantages of renting close to where they work in urban areas.
Yet recent research suggests that may be changing and Millennials indeed are thinking of homeownership.
According to Pew Research, 64% of Millennials say it is very important for them to have an opportunity to own their own home; twenty percent named it as one of their most important priorities in life, right behind being a good parent and having a successful marriage. In the shorter term, Trulia’s biannual American Dream survey shows 26% of Millennials have become more positive about owning a home over the past six months compared to 18 percent of 35 to 44 year-olds and 45 to 54 year-olds, and 22 percent of baby boomers.
With the oldest quarter of this cohort about to hit their thirties, perhaps its time to think about how to make it easier for the dream of homeowernship to become a reality?