The Impact Generation Z Will Have On The Housing Market

The speed at which my sons are growing up is a constant reminder of how quickly the next generation is becoming a major factor in the housing market. Just what impact will they have? What does it mean for today’s investors?

Generation Z: Even Bigger Than Millennials?

Gen Z is already becoming a big force in the real estate market. Statistics put them at a quarter of the US population and each carrying a quarter million dollars in rental income value for landlords.

Knowing that my kids may be a little different than most, this generation is likely to be big renters. I know. I’ve spent years trying to train my kids to be entrepreneurs and investors and landlords, not renters and workers. In fact, in my first book on Amazon, Turning Distress Into Success, I credit one of my sons with giving me the idea to go into note business and to ‘become the bank’.

Yet, whether it is kids who just don’t want to follow their parents’ footsteps, who see real estate as a boring office job, or just haven’t been taught about the benefits of owning real estate, we can expect this next round of the population to join an already heavy renter pool.

There are many factors that could keep Gen Z as renters for many years too. The economy is good, but their credit is still thin, lending is tight for regular home buyers, and it can take over 20 years to save a 20% down payment in many US cities due to high living costs.

Leveraging the Rent

What types of rentals are Gen Z likely to need right now?

Student housing is still a big one. It has become a highly profitable sector too. This may be apartment buildings associated with colleges and universities, or stand alone housing in which multiple students live off campus. It could be co-living for young entrepreneurs and travellers, or simply affordable rate apartments.

While some say that this generation is far more eager to spend on apartments that look like they could be on TV or in a rap video than millennials, even if they have to pile in their friends to split the bills, they are still going to be limited by income and expenses. Unless their parents are paying the rent.

If you hope to rent to them, know that you are going to need some features you might not have had your whole career as a landlord. This is the ‘iGeneration’ or ‘Snapchat Generation’ which is fully connected all the time.

They need incredible internet connectivity as standard, expect to be able to do everything via their phones, and care a lot more about YouTube and Netflix than those channels the old people used to watch. From finding these renters to taking deposits and repair requests, they want to be able to do everything with a couple of clicks or voice control.

Where They’ll Live

While millennials have been maturing and increasingly seeking out suburban destinations with more house for the money, and real yard space and views, generation Z is still very much in the exploratory and social part of their lives where they want to be engaged and entertained. This may help in continuing to revive distressed urban communities and to support recent urban development that wasn’t as popular with millennials.

Looking at the big picture, this generation probably won’t be that much different from previous ones though. Similar to millennials, they too will cycle through different phases in their own lives. Yet, it is in the details (location, amenities and service) that will determine which landlords benefit most and get the most opportunity to serve them.

Investment Opportunities

Find out more about investing in secured debt and real estate, go to NNG Capital Fund

Image by Kevin Phillips from Pixabay