Historically, Americans have glorified the suburbs and single-family homes. Government policies provide generous subsidies for homeowners and praise them as role model citizens. In contrast, most renters have received no subsidy and been tacitly frowned upon as being unstable and financially incompetent. However, in recent years, owning a suburban home no longer seems to be the classic American dream. Since 1980, homeownership has leveled off at around 65% and has actually been decreasing since 2004.

Various reasons make renting more appealing than buying for young people. First, while in the past most Americans used to hold the same job for 30 years and never leave their hometown; geographical mobility is widely possible and more commonplace today. Millennials switch jobs every couple of years and move just as often. Our lives have become much more transitory rather than a stable and predictable route. Therefore, a home – an immobile entity – inevitably loses its attractiveness. Due to transaction costs, homebuyers are forced to hold their properties for a period of time to recoup the costs before resale should they choose to do so.

Renting can make sense economically on a day-to-day basis. Living in a two-bedroom apartment close to the job is preferable to spending an hour commuting to work and another back, meaning less time to actually work or spend with family. In an era where time equals money, home owning requires hefty trade-offs. Not having to pay a mortgage also frees up capital for food, entertainment as well as investment in other areas.

Besides, renting proves to have positive environmental and health impact. Large house use up more resources to construct, maintain and heat. Homeowners typically depend on cars, which further pollutes the environment. Urban renters are more eco-friendly as they occupy smaller spaces, utilize public transport, and walk more – which undoubtedly leads to them being in better shape than suburbanites.

The current US economic conditions point to renting as the most realistic option for the younger demographic. Although the US economy has been slowly recovering, youth unemployment and underemployment remain high, making owning a home impossible. The fortunate ones find jobs in metropolitan areas, where home prices are out of reach; so renting is a no-brainer.

Thus, for millennials who are mobile, urban-dwellers and cautious about having their capital (or lack thereof) tied up in purchasing a home, renting looks like the true next big thing. Perhaps it is time for the US to adapt its policy accordingly to embrace the trend.

Sources:
http://money.cnn.com/2014/06/04/real_estate/american-dream-homes/index.html
http://www.mikemilken.com/pdfs/WSJ-op-ed-on-Restoring-the-American-Dream.pdf

http://www.census.gov/housing/hvs/data/q413ind.html
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