Gen Z is Getting Priced Out of Homeownership

Let’s talk about the situation in the US as the data is the most readily available.

Home prices have skyrocketed in recent years, far outpacing income growth. In major cities like San Francisco and New York, the median home price exceeds $1 million. To put this into perspective, a study by Zillow found that nearly 70% of homes in these cities are unaffordable for first-time buyers (https://www.zillow.com/research/childcare-affordability-33677/). The lack of affordable housing options, restrictive zoning regulations, and speculative investment have all contributed to this crisis.

But it’s not just the housing market that’s the problem. Inflation is also taking a toll on Gen Z’s finances. As prices rise, the purchasing power of their wages decreases. This means they can buy less with their money, making it even harder to save for a down payment or afford basic necessities like groceries and healthcare. For example, according to data from the Bureau of Labor Statistics, the cost of groceries has increased by over 20% in the past five years, while wages have only grown by about 10%.

And then there’s student debt. The average student loan debt in the US is over $37,000 (https://educationdata.org/average-student-loan-debt#:~:text=The%20average%20federal%20student%20loan,to%20pursue%20a%20bachelor’s%20degree.), a staggering amount that can take years to pay off. High interest rates and difficulty repaying loans can lead to delinquency and default, further exacerbating the problem. A study by the Federal Reserve found that nearly 40% of students who graduated with debt in 2019 were struggling to make payments on their loans.

Stagnant wages are also a major concern for Gen Z. While wages may be rising slightly, they’re not keeping pace with inflation. This means young people aren’t experiencing the same real wage growth as previous generations, making it harder to afford basic necessities and save for the future. According to data from the Economic Policy Institute, the median hourly wage for workers under the age of 25 has only grown by about 10% since 2000, while the cost of living has increased by over 30%.

As someone who calls Singapore home, I’ve had a unique perspective on the global housing crisis. Compared to many overseas markets, Singapore’s approach to affordable housing is a breath of fresh air. The government’s Housing and Development Board (HDB) plays a crucial role in providing affordable homes for first-time buyers, particularly young families just starting out. With relatively low-interest rate facilities and protections against debt collection, HDB helps ensure that families have a stable foundation to build upon.

This is more than just a moral imperative – it’s an economic one. When basic needs like shelter and food are met, young people are free to pursue their passions and ambitions, whether that’s starting a family, launching a startup, innovation, or doing creative work. By providing a safety net, governments can unlock the full potential of their youth, driving productivity and innovation that benefits the economy as a whole. Also, this safety net isn’t provided for free, as young people have to prove that they are working and contributing to the economy in some way to get the subsidies homes and housing grants.

In contrast, when housing is unaffordable, it creates a vicious cycle that rewards those who are already wealthy, rather than those who are willing to work hard and take risks. This can lead to a culture of rent-seeking behavior, where individuals prioritize profiting from existing assets over creating new value. As this trend continues, the economy suffers, and social mobility stagnates.

It isn’t all sunshine and roses though as the marketing SG over 2024 has actually went higher by quite a bit and in the end the private market prices will still affect the price of subsidies housing. A good overview of the SG market in 2024 can be read here https://stackedhomes.com/editorial/are-more-property-cooling-measures-coming-to-singapore-in-2025/#gs.ivt1om

In the end governments today, given the already high housing prices, would do well to ensure that their young people have a place to stay and the way to do that could be to

• subsidize the homes for first time buyers at up to 20-40% lower than market rates
• ensure the subsidized homes cannot be resold on the market for up to 10 years to prevent speculation
• offer low interest rates to get young couples are chance to start families