Many Gen Z Americans entering the work force are finding the cost of rent is eating up most of their paychecks.
And those living in five cities in particular are having a difficult time affording rent – and are faring worse than millennials were when they were the same age.
That is according to recent research from Zillow, which revealed that Gen Z Americans living in Houston, San Antonio, Denver, San Diego and Minneapolis are worse off than their millennial counterparts were 10 years prior.
Gen Z is made up of those born between 1997 and 2012, and three out of five of them are spending more than 30 percent of their income on their rent, the research found.
Overall in 2022, those in Gen Z who were ‘rent-burdened’ – paying more than a third of their income on housing – was down slightly than the number of millennials in the same boat in 2012.
In these cities, though, Zillow found an uptick in rent-burdened young people from a decade before.
Zillow economist Kenny Lee said this is a troubling financial trend.
‘It’s really tough for young renters,’ Lee told CNBC. ‘High rent burden can set young renters behind financially, impacting their ability to afford other essential expenses, let alone saving up for life goals down the road.’
In 2022, there were around 5.2 million Gen Z renter households in the US.
With an annual median gross rent of $16,980 and an annual median gross income of $42,000, they were spending around 40 percent of their income on rent, reported The New York Times.
There are five cities in particular where Gen Z are having a harder time affording rent than anywhere else, with those who are rent burdened reaching more than 60 percent.
Zillow assessed data from across the 30 largest metro areas in the US, and surprisingly, cities such as New York, Los Angeles or San Francisco were not high on the list.
Houston was determined as one of the cities with more rent burdened Gen Z than there were millennials, at 66 percent in 2022 – 12 percent higher than in 2012.
Fellow Texas city San Antonio was also on the list.
Some 66 percent of Gen Z are determined to be rent-burdened there, according to Zillow, compared to 59 percent of millennials in 2012.
The average Gen Z resident had a gross annual income of $37,100 in the city two years ago, with an average monthly rent of $1,215.
Denver was also find to have a 6 percent increase of rent-burdened Gen Z in 2022 than millennials in 2012.
For Gen Z, 61 percent of them were spending more than 30 percent on their housing expenses, compared to 55 percent of millennials.
In 2022, the median gross annual income for a Gen Z worker in Denver was $60,000, compared to monthly rent costs sitting at $1,730.
San Diego saw the highest percentage of rent-burdened young people, made up of 73 percent of Gen Z compared to 67 percent of millennials in 2012.
Lastly, Zillow found Gen Z were struggling more than millennials in Minneapolis, where 62 percent of Gen Z were rent-burdened in 2022, versus 56 percent of millennials the decade prior.
The median annual gross income for a Gen Z renter in 2022 sat at $42,090, with average monthly payments of $1,370.
A possible explanation behind the rising rents for young people away from the biggest markets could be the Covid-19 pandemic, CNBC reported.
After and during the pandemic, an unexpected rush of demand for new housing came from professional city dwellers who started looking for more space in the suburbs.
Some of the lasting effects of the pandemic and a short supply of housing has left many new renters and property buyers holding the short straw and paying far more than generations before them.
‘The housing market really couldn’t keep up with this demand because of decades-long undersupply of housing,’ Lee said.
He added, though, that hope for Gen Z is on the horizon as the ‘rental market has been stabilizing recently.’
