byline: Sylvia Marshall
Young Americans have the same dream that their parents did 25 to 30 years ago. They want to rent or buy their own place, but their dreams are based on two words: availability and affordability. Many of them graduate from trade schools or college and move back home because they are reeling from the shock that there are few places to rent and the price of rent is sky high. According to a joint study by the Illinois Economic Policy Institute and the Project for Middle Class Renewal, our state has a shortage of 142,000 housing units and needs to build 227,000 units in the next five years to keep pace with the demand for housing (Univ. of Illinois, Urbana-Champaign).
Salaries for young Americans range between $47,340 and $69,000 for millennials born between 1981-1996 (U.S. Census Bureau). A slice of this demographic still lives with their parents. In Feb. 2024, Newsweek Magazine reported that millennials who came of age after the Great Recession upended the housing market. Many of them were “tired of waiting for the perfect moment” and decided to buy their first house even though economic conditions were not ideal.
Because of high prices, millennials have waited to get married and start families, so there has been “a delay in household formation.” However, “right now, the rate of household formation is double the rate of population growth.” And housing prices continue to go up because of the great demand of this age group for housing, which is in short supply (Phil Powell, Executive Director of Business Research Center, Indiana University, “How Millennials Are Shifting the Housing Market,” Newsweek Magazine, Feb. 2024).
In Sept. 2024, U.S. median home prices were trending upwards of $412,300, a 40% increase over what home prices were in 1990, when parents of millennials were buying homes. Coupled with the high cost of living and student debt, this stark reality has forced young millennials to take a different path than generations before them. They have allocated more money to savings and delayed getting married and having children. After losing out on bids for several houses, some have decided it may not be possible to purchase a home and opted to continue renting. (Money Section, CNBC, Stock Market & Business, Sept. 2024).
For millennials who cannot afford a home but want to live on their own, renting is the next best option. Fair market rent (FMR) varies by zip code and “estimates the cost of rent in a specific area” for a specific size home. It was developed by HUD to be used with housing programs such as Section 8, but FMR can be used by anyone to determine affordability. For lower-priced rents in Illinois, an hourly housing wage of $28.81 is needed to afford the fair market rent (FMR) of $1,498 a month for a two-bedroom apartment ($59,925 annually). For more expensive areas in Illinois, an annual take-home pay of $64,281 is needed for a two-bedroom apartment. In determining whether you can afford to rent an apartment or purchase a home, the monthly housing payment should not be more than 30% of gross monthly income. All other monthly expenses such as utilities, car payments, student loan payments, food, etc., must also be subtracted from monthly income.
Congress needs to take action to assure the future of young Americans who have been postponing the American Dream of buying a home and raising a family. America needs legislative policy that makes buying a home affordable. On the home front, county, state, and municipal governments must do their part to address housing shortages. Community planning departments should do a thorough review and address zoning, which could mean setting aside areas for apartment and multiunit dwellings.
Some neighboring counties are giving a boost to affordable housing. DuPage County has established a land bank with county-owned surplus land for future affordable housing projects.
Young Americans deserve a future, and with an aggressive public and national partnership, they can fulfill their dream of home ownership. Innovative approaches such as a renter’s tax credit, zoning and land use reforms, and increased federal income housing tax credits can make home ownership a reality for more people. We must also limit the actions of private equity developers who buy up land and drive up the costs of rent. Real estate investors bought a bigger share of U.S. homes in Q1 2025 with 27 percent of all homes sold in the first three months – the highest share in at least five years. (“Investors Buy Bigger Share of US Homes in Q1,” Alex Viega, Associated Press, Los Angeles).