Home, sweet home!
For ages, access to ownership was a rite of passage from childhood to adulthood. As you grew up, you became responsible enough to own a house and a car, i.e. get your own space and be able to move around. They were also a marker of your social status: the bigger the house or the car, the more successful you’ve been (at least for western societies). However, we have observed over the past years that the relationship with ownership has changed, especially among younger generation.
In this post, I have decided to focus on how, for millennials, this relationship to home ownership has evolved, creating opportunities for new models to emerge.
It’s a fact: house prices are rising while incomes are stagnating (as illustrated by the graphs below). This affects the whole population, and more specifically the youngest generation as, being the latest ones to enter the job market, they haven’t yet been able to create savings.
Moreover, millennials’ lifestyle is increasingly flexible with an ability to easily switch jobs (43% of them plan to leave their current jobs within two years according to this Deloitte study) and a high proportion of them being self-employed (42% of U.S. working millennials freelance according to this study).
Last but not least, millennials value more experience over ownership, with more than three in four of them choosing to spend money on an experience or event over buying something desirable based on this study conducted by Harris Poll (note that we already discussed about this behaviour in my previous article about millennial travel available here).
As a result, most of today’s HENRYs (High Earning, Not Rich Yet) can’t afford to, and don’t want to, buy a home.
Having spotted this opportunity, some startups are now offering innovative solutions to facilitate access to home ownership, targeting HENRYs who would like to buy a house but can’t afford to. Most of them focus on the two biggest hurdles in buying a property: saving the necessary deposit and getting a mortgage. The three main models we have come across so far are:
- ‘Buy-to-rent’, such as StrideUp and Unmortgage, in which the startup owns a part of the house, resulting in a percentage of ownership, and provides you a mortgage, resulting in a rent paid by the end user to the startup
- ‘Equity loan’ such as Proportunity and Ahauz, in which the startup only contributes to your deposit, resulting in a percentage of ownership in the property, while the mortgage is provided by a third party
- ‘Group purchase’ such as Stepladder, in which the startup helps you raise your deposit by matching you with a group of other members that share the same deposit target
Thanks to these models, consumers are able to buy a home while providing a minimum deposit and maintaining a sustainable level of debt.
However, some HENRYs just don’t want to own a house. According to this Goldman Sachs study, 15% of them don’t intend to purchase one in the near future and 7% are indifferent. Still, they need to live somewhere! They are just fine with renting.
Targeting this group of the population, some startups are reinventing the house renting model to better fit into current HENRYs lifestyle. Focusing on the renter experience and the millennial quest to belong to a community, we observe an increasing interest in ‘co-living’ offers, proof being the increasing search interest on Google over the past 3 years (illustrated by the graph below).
For those who haven’t come across such offers yet, co-living solutions offer you to rent your private space, in most cases a studio fully furnished with all services included (from wifi to cleaning), while giving you access to semi-public and public space where the co-living community gathers for everyday life (such as cooking and eating, exercising) and events (such as masterclass, parties, etc.). It offers the convenience of enjoying your own space while removing all the administrative hassle and giving you the opportunity to connect with a community of people sharing the same values as you. So far, the main European players we have identified are Lyvly, Colonies, Urban Campus, Sharies and The Collective.
Personally I find it very interesting to observe that some entrepreneurs have decided to leverage our more and more digital modern life to reinvent ‘villages’, right in the heart of cities where loneliness is becoming one of the major public health threats (the average national loneliness score in America is 44, more details here). I am very curious to see how much co-living will be adopted by new generation moving forward!
