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Who's Driving Rental Demand Now

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Who's Driving Rental Demand Now

The number of renter households headed by Millennials peaked and is now declining. What will the rental landscape look like with Gen Z?

December 4, 2023
Two Gen-Z renters moving cardboard boxes into new apartment
Image: Drazen / stock.adobe.com

Millennials added 2.5 million young renter households between 2007 and 2021 by being a larger cohort and renting at higher rates than Gen X. But that peak is over and Millennials are no longer driving renter household growth. 

Multifamily construction is slowing, which indicates a downturn in rental markets. Despite that, some in the industry anticipate rental demand will stay strong due to favorable demographics. But in many ways, the Joint Center for Housing Studies of Harvard University reports, this is the end of an era. The question is: Will Gen Z uphold the levels of growth in renter households we saw with Millennials over the past 15 years?

For one, after decades of driving growth, the number of renter households headed by millennials (aged 28-42 in 2022) has peaked and is declining (Figure 1). Indeed, this large cohort has reached ages when more households are transitioning into homeownership rather than forming new renter households. Gen Z (aged 13-27 in 2022) is now the only generation adding renter households, therefore demand for rental housing will continue to grow only if the number of new Gen Z renter households added outnumbers losses among older generations, who are leaving rental units due to homeownership transitions or mortality.

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