How Millennials and Gen Z build wealth without home-buying

I recently talked with Debra Kamin from the New York Times about the rising rate of people, namely Millennials and Generation Z, renting single-family homes as opposed to buying. The concept I’ve been fascinated with lately is the concept of the “Old World American Dream.” I’ve described it before: the white picket fence, green grass, two kids, one dog deal. 

We assume every Millennial wants a “suburban lifestyle” as they get older, hence why they are renting houses when they can’t afford to buy them. It’s also an assumption that Millennials have wasteful consumer habits, like a penchant for expensive coffee or avocados. (When in reality, they’re very aware of what’s really creating the generational wealth gap.) 

I think there are a number of factors that impact the “why” of renting vs. buying a home for Millennials beyond their desire to live in suburbia. Millennials don’t just rent a house to achieve the dated “American Dream,” they’re also renting a house because they recognize that buying isn’t a realistic financial decision anymore, and that there are other ways to accumulate wealth that were unavailable to their parents. 

One way that they’re accruing wealth? By investing, which gives them more control over their money more than owning a home would. 

Millennials and Gen Z have hit the stock market hard in 2020, with Forbes reporting that Americans opened 10 million new brokerage accounts in 2020. Over half of them come from Robinhood, an app that has made understanding and entering the stock market more accessible for these two age groups. The app’s primary age group is 31-years-old. 

These types of apps and social media platforms (Mint, Acorns, Wealthfront) are pretty commonplace now, enabling young investors to build portfolios from their smartphones, sometimes at no additional cost to them. 

They’re also top investors in alternative currency. The Motley Fool conducted a survey that found 40% of Millennials and Gen Z participants had purchased cryptocurrency to accrue wealth and that Gen Z were more likely than Millennials to hold stocks, implying that they’re learning and playing the game younger than generations before them. Is this the safest way to accumulate wealth? Probably not, but some early investors are seeing the benefits.

There are a few reasons why Millennials and Gen Z are investing and finding alternative ways to accrue wealth, rather than buying a home. They are A) two generations with a historically large amount of personal debt, and B) that the cost of buying a home is historically high, and C) they’re focused on controlling their assets as they try to close the generational wealth gap. 

A home comes with property taxes, it can be devalued, it can depreciate, and is difficult to maintain. This is not a generation that can afford a big bill should a pipe burst or should they need to replace a roof, as most Millennials, considering 27% of Millennials, surveyed in a recent new Harris poll, can’t afford a $400 emergency. And if they can, they would rather invest, save, or pay off debt due to their unique financial situation. This is a generation that, as consumers, wants more visibility into how their money moves. With a home, it can be difficult to control the value of your investment. 

I think a lot about how the “American Dream” has been constructed around homeownership, and how each generation changes with the advancement of technology. Right now, Millennials and Gen Z are pretty disenchanted with buying a home. Their lifestyle, their financial circumstances, and their approach to money is very different from their parents, and as a result, so is their definition of the American dream. What’s important is that Gen Z and Millennials accrue wealth in a stable, diverse way, rather than enter a sellers real estate market. 

The takeaway of a new American dream is not to mourn it but understand what the future looks like. We may soon have a generation of renters with the means to grow their future in ways that weren’t possible in this country 20 or even 10 years ago. We should be asking ourselves how we adapt to that new American dream.  I believe Rhino is part of that answer.  Security deposit insurance from Rhino is lowering the price of renting as the price of buying rises, enabling these renters to keep more control over their cash. Something that Millennials and Gen Z value way more than homeownership.

Paraag Sarva

Paraag Sarva is the CEO of Rhino and has ten years of experience as a multifamily owner and developer. He’s passionate about modernizing the renting experience for both renters and landlords. Paraag has never met a security deposit he liked.