Here’s How Much Gen Zers and Millennials Are Overspending On Housing In 2024
The costs of renting an apartment or a monthly mortgage payment continue to rise, and perhaps no one feels the pinch more than members of Generation Z or the millennial group. According to a study by RentCafe, Gen Zers will have spent an average of $145,000 on rent by the time they turn 30; millennials spend an average of $127,000 from ages 22 to 29.
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A general rule of thumb is that a rent or mortgage payment shouldn’t exceed 30% of your gross income — that’s before taxes are subtracted. Ramsey Solutions, headed by financial guru Dave Ramsey, advises housing costs shouldn’t exceed 25% of take-home pay.
What percentage of salary are millennials and Gen Zers paying today? And are they sticking in that 25% range of after-tax salary for their rent or mortgage costs? GOBankingRates surveyed 1,039 Americans 18 and older and asked them a variety of financial-related questions, including “What percent of your take-home (after taxes) pay do you spend on your mortgage (or rent)?”
How do Gen Zers — usually defined as being born between 1997 and 2012 — and millennials (1981 to 1986) fare when it comes to housing costs?
General Housing Spending
Among respondents to the survey, 47.16% of respondents of all ages reported spending less than 30% of their take-home pay on their monthly or rent payments. For 30.61% of survey participants, their payments fall between 30% and 40% of their salary after taxes, each money. Nearly 15% — 14.92% — pay between 40% and 50%, while 7.31% spend more than half of their after-tax income on housing costs.
But which group is saddled with the largest housing payments per month?
Less than 30%
It’s no surprise that among respondents ages 65 and over — who bought their homes years ago and even could have paid off their mortgages — 70.3% of them pay less than 30% of their after-tax income on housing costs.
But among the 18 to 24, 25 to 34 and 35 to 44 age ranges — the latter two which straddle the millennium generation — the number of people who can stick to that recommended under 30% range is sharply lower.
In the Gen Z group — the youngest respondents — only 36.45% pay less than 30%, with the number growing to 39.93% and 47.89% in the millennial-era age groups, respectively.
From 30% to 40%18 to 24, 25 to 34, 35 to 44, 45 to 54, 55 to 64, 65 and over
The Gen Zers continue to lead the way in this category, too, with 38.42% of them paying between 30% and 40 % of their after-tax pay.
In the millennial age ranges of 25 to 34 (37.41%) and 35 to 44 (32.63%), paying more than 30% of the salary for rent or mortgage payments is common.
From 40% to 50%
Again, the seniors have the lowest rate of big payments, with just less than 4% of them paying between 40% and 50% of their after-tax income for housing costs. Surprisingly, respondents between ages 45 and 54 have the highest rate of big payments, with 19.46% saying their monthly payments fell in this range.
How about the Gen Zers? Among respondents, 18.23% reported paying between 40% and 50% of their take-home pay for housing. For older age groups, the number dropped to 15.47% for those 25 to 34 and 12.63% for those aged 35 to 44.
50% or More
This category is the equalizer among age groups, with more respondents 65 and older (7.92%) paying at least 50% of their after-tax income than Gen Zers (6.90%) as well as people in the 25 to 34 span (7.19%) and 35 to 44 group (6.84%). The spike in spending by the seniors likely occurs because retirement income isn’t as high for them as when they were working, causing a drop in income.
Why Is the Cost So High for Gen Z, Millennials
That answer is simple. It’s because members of these two generations have seen incomes steadily increase between 1999 and 2022 by 77% in that span, according to a 2023 report from Moody’s Analytics, but it isn’t enough for comfort in housing prices.
While that sounds like a bundle, consider this. In the same time period, rent has grown by 135%, per the research.
Methodology: GOBankingRates surveyed 1,039 Americans aged 18 and older from across the country between Nov. 9 and Nov. 13, 2023, asking 19 different questions. The questions included this one: What percent of your take home (after taxes) pay do you spend on your mortgage (or rent)?. GOBankingRates used PureSpectrum’s survey platform to conduct the poll.
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This article originally appeared on GOBankingRates.com: Here’s How Much Gen Zers and Millennials Are Overspending On Housing In 2024
