Oct 16, 2023 - Real Estate

Gen-Z is spending 30% of income or more on rent in Philly

Illustration: Brendan Lynch/Axios

The majority of Philadelphia's Gen-Zers are coughing up at least 30% of their income for rent, according to the latest U.S. census data.

Why it matters: Steep prices and mortgage rates pose seemingly insurmountable hurdles to homeownership — and in many places renting isn't necessarily an affordable alternative.

Driving the news: 60% of Philly's Gen Z renters are paying at least 30% of their earnings on rent, compared to 56% of homeowners, per Census data.

The big picture: Across the U.S., pinched young people are fanning out from big cities, returning to their childhood bedrooms or moving in with partners.

  • Across the 100 biggest U.S. metros, over one-third of 15- to 24-year-olds who rent spend 30% or more of their income on housing, Axios' Simran Parwani reports.

Zoom in: Saving for a down payment is the biggest obstacle to homeownership, Gen Z-ers say.

  • It's one reason the typical first-time homebuyer last year was a record-high 36-years-old, per the National Association of Realtors.

Between the lines: Philly has an affordable housing crisis, which some predict will worsen over the next decade as average asking rents continue to rise.

Threat level: The deepening crisis has contributed to the displacement of low-income residents from North, West and South Philly as those areas gentrify, Nora Lichtash, a spokesperson for The Philadelphia Coalition for Affordable Communities, tells Axios.

  • "People are really struggling to pay the rest of their bills because their housing costs are so high," she says. "There just isn't enough left over."
Share who spend 30 percent or more of their income on housing in the Philadelphia area, 2022
Data: Census Bureau; Note: Based on household income. Householder is the person/people in whose name the housing unit is owned or rented. Renter housing costs includes monthly contract rent and utilities paid by the renter while owner costs includes monthly mortgage payments and other debts, utilities, real estate taxes, insurance, etc.; Chart: Simran Parwani/Axios

Zoom out: One in three Gen Z-ers (34%) nationwide surveyed by Freddie Mac say owning a home feels impossible in their lifetime, up from 27% in 2019.

  • The shares are higher for Black (35%) and Hispanic (50%) respondents.

Meanwhile, America's housing shortage has hiked the cost of both buying and renting.

Yes, but: The vast majority of young renters in the U.S. are renting for lifestyle reasons, preferring the flexibility to move, RealPage chief economist Jay Parsons tells Axios.

  • Many Gen Z renters have lower incomes but also lower bills beyond rent, which allows them to live in pricier locations, according to Parsons.

Reality check: Older Americans on fixed incomes are especially burdened by high housing costs, contributing to rising homelessness among Baby Boomers, The Wall Street Journal reports.

Go deeper: Student loan interest has started again, adding to affordability pressures.

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