Millennial and Gen Z renters are being hit harder by inflation as the shrinking of the dollar outpaces the growth of their paycheck, according to a new report.
Gen Z and millennial renters who took on a new lease in July have personal inflation rates of 11.6 percent year over year, compared to 8.5 percent for the general population, according to a report released Thursday by Redfin.
Rent prices have been the biggest driver of inflation, with young renters contending with asking rents rising 13.5 percent year over year in July. Millennials and Gen Zers allocate more than one quarter of their income towards rent, the largest of all their spending categories, making it harder for them to put money away to eventually buy a home or retire, the report notes.
Sheharyar Bokhari | Redfin
“Inflation is hitting young renters hard because not only have prices of everything from food to fuel soared, but so have rental prices,” Redfin Senior Economist Sheharyar Bokhari said in a statement. “Homeowners are forking over more money at the grocery store and the gas pump, but at least the number on their mortgage statement isn’t going up every month.”
“Combine high rental prices with student loan debt and relatively low incomes, and it’s difficult for millennials and Gen Z renters to put money into savings, retirement accounts and down-payment funds to eventually buy a house,” Bokhari added. “They may also have higher interest rates on debt, which cuts further into their potential savings.”
Millennials and members of Gen Z have higher overall inflation rates compared to the general population regardless of whether or not they rent, the study found, with Gen Z charting an overall inflation rate of 9.2 percent and millennials at 9.6 percent, compared to 8.5 percent for Americans at large.
Rent remains the highest driver however, due to the small share of millennials who own a home. Only 48.5 percent of millennials own a home, compared to 70 percent of Gen X and 80 percent of Baby Boomers. This leads to older generations having lower inflation rates because they’re more likely to own their homes and are able to gain equity rather than spending their money on rent which is liable to increase every year.
Members of Gen Z, most of whom are just getting started in the work force and likely inhabit entry level positions, have seen their incomes increase 9.7 percent alongside millennials between 2020 and 2022. Expenses have risen at a much higher rate during the same period however, climbing 17 percent.
As expenses have risen, the typical Gen Z renter making the median income of $40,953 has just 1.9 percent left in their paycheck left as disposable income after accounting for food, transportation and housing costs. That’s down from 7.7 percent of their check in 2020, according to the study.
