Each month, a large share of young adults in metro Denver are stretching financially to make the rent. Not as well known is that tenants their parents’ and grandparents’ age are financially burdened at even higher rates, according to a study from Abodo, an apartment search engine.
The U.S. Department of Housing and Urban Development defines a household as rent burdened when they pay 30 percent or more of their income for a place, a threshold used since 1937.
Abodo found that in Denver, 43.1 percent of millennials, ages 18 to 34, spend more than 30 percent of their incomes on rent. About 44.1 percent of Denver renters in Generation X are rent burdened, while 48.6 percent of baby boomers, those born between 1946 and 1964, are in that camp.
People tend to rent when starting out and purchase properties as they age. Adobo, using data from the U.S. Census Bureau, found that 65.5 percent of millennials are renters, while 37.9 percent of Gen Xers are, and just 23.3 percent of baby boomers.
Age, in theory, should bring higher incomes and greater financial security. But what the data seems to suggest is that people who remain renters for the long haul face higher odds of ending up with housing costs that are more burdensome rather than less so.
“Within the context of our study, we can’t say with any certainty that financial security causes or is caused by homeownership, but renters overall tend to be much more cost-burdened than their owning counterparts,” said Sam Radbil, a spokesman for Abodo, which is based in Madison, Wis.
One explanation Radbil offers is that some boomer households may have downsized out of homes they owned and became renters. The incomes of retirees tend to be fixed, but rents have risen sharply in many cities, including Denver, in recent years.
Another one is that households in a stronger financial position purchased, while those who are renting at a later age have struggled financially.
“People who are renting as they get older probably have had lower incomes throughout their lives,” said Rich Jones, director of policy and research at the Bell Policy Center in Denver.
Some might have owned a home before losing it in the Great Recession, but many probably never did own. They are involuntary renters with fewer financial resources available to them as they age.
The share of burdened boomer renters in Denver lines up with the national rate of 49 percent. Millennial renters in Denver are burdened at a lower rate than the nation, 43.1 percent versus 46.5 percent.
But a higher share of millennials are renting than in prior generations and purchasing homes at a later age. That makes the issue of rising rent burdens as people age one to watch, Jones said.