The biggest financial issue for Millennials, aside from crippling student debt, is that too much of their income is being eaten away by housing costs. Housing is the main reason why Millennials are saving much less than the Boomers did at their age, not lower salaries or increased spending on products & services.
Some commentators have pointed out that Millennials are overwhelming choosing to live in large metros that have a limited housing supply.
This isn’t so much a lifestyle choice as a career one. Take into account the highly educated status of Millennials and the types of jobs that they’re trained for: tech, creative and professional services. These jobs are likely to be concentrated in the largest cities because of the high value of agglomeration.
Yet, spiralling housing costs aren’t a given. Yes, land prices in the big cities will inevitably increase with increased demand, but we can build more dwellings on each plot of land to compensate for this. And more than ever Millennials are showing a preference to live in apartments, even after having kids.
In reality though most American cities aren’t responding to this change in housing preferences, and this is the real reason behind the Millennials housing woes. In fact, many cities actively contribute to the problem by stymieing or outright forbidding the building of higher density housing, preferring to keep the status quo of single family dwellings even when it harms society as a whole.
Until there’s a widespread change in the way that cities are run, and an end to the pervasive micromanagement that occurs around approving higher density construction, housing will continue to be a serious threat for the future financial security of Millennials.