Some baby boomers are setting their sights on the rental market while others are holding off on moving plans.
As the generation with the most real estate wealth, baby boomers have a major influence on the rental and housing markets.
Founded in 2017, Rhino is an insurance agency that offers an alternative to cash security deposits. Through Rhino Insurance, tenants are able skip the upfront charge by paying a small monthly fee to Rhino, which then insures the apartment.
In the blog post, Le wrote that boomers are drawn to the rental market for a variety of reasons including a maintenance-free lifestyle, the ability to relocate with ease, and socialization.
“As you get older, there are only so many things you want to concentrate on. Apartment life lets you focus on things that matter and get rid of stuff that takes up a lot of time,” a then 60-year-old renter said to CNBC.
As of June 2021, 9.74 percent of Rhino renters were over 50, up from .55 percent in October 2019.
But as the demand from boomers increases, the affordability gap between younger generations in the rental market widens.
“Baby boomers have the cash flow for a considerably nice rental home, especially compared to the millennial counterparts. They hold $59.4 trillion in generational wealth, compared to the $5 trillion that millennials have. That is twelve times as much,” Le wrote. “If they continue to grow as a renting population, baby boomers have a profound impact on the price and quality of rental homes. This will be tough for millennials, many of whom already pay more than 30% of their income in rent.”
By 2035, RentCafe predicts that renters older than 60 will account for nearly one third of the U.S. rental market.
“Considering the current state of the market with rising inflation and a spiking home purchasing race, we are already seeing buyers turn to renting, which is driving up overall demand. In this saturated market, baby boomers now make up a large portion of renters. With high demand and seniors who have the ability and flexibility to pay higher prices, millennials are at risk of getting priced out of the rental market,” Le told Inman in a follow-up email.
Influence on homeownership
While there’s a subset of boomers eager to rent, there’s another hesitant to sell.
Earlier this month, Insider reported that aging boomers are helping fuel the 2021 housing crisis because many aren’t listing their homes to downgrade space, move in with their families, or move into assisted-living facilities, as typical older generations would do.
Per the report, the pullback is due, in part, to seniors refraining from listing as a safety precaution against COVID-19. Some are also waiting for the market cool before listing because of the fear that it will be too difficult to find a replacement home right now.
According to a New York Times analysis by Michael Kolomatsky, boomers currently hold 44.1 percent of real estate wealth, while Gen-X holds 31.2 percent and millennials hold 11.2 percent.
The generational gaps have been more apparent than ever in the midst of this inventory crisis. According to a report by the National Association of Realtors (NAR), the U.S. fell short of an estimated 5.5 million new units from 2001 to 2020 compared to 1968 to 2000.
“It’s the most critical factor affecting the housing market right now,” Gay Cororaton, a senior economist at the NAR, told Inman last month.
“In 2029, the youngest baby boomers will have their 65th birthdays and the oldest their 83rd. As the tail end of this generation heads to retirement, some will sell their homes, and if they don’t, eventually their estates will,” Kolomatsky wrote. “But unless a lot more homes are built, and fast, the younger generations will simply have to wait for their share of real estate riches.”
From 2001 to 2020, an annual average of 1.225 million new units were being built, down from the annual average of 1.5 million from 1968 to 2000. Builders will have to build over 2 million new housing units each year for the next decade to bridge the 5.5 million unit gap.