From Inman News Features
Increases in local market rents can impair young adults’ ability to form their own households and afford housing without help from their parents, a Harvard study found.
The study, “How Local Rent Change and Earning Capacity Affect Natural Household Formation by Young Adults,” describes “nest leaving” as a precondition for household formation, which is a key first-step toward becoming a homeowner. Households formed independent of parental homes are within the target bracket for first-time home buyers.
Authors Zhu Xiao Di and Xiaodong Liu followed a group of young adults aged 25-34 who were living with their parents in 1985 and found nearly 23 percent of the young people still lived with their parents 10 years later.
The young person’s potential earnings, measured by formal education, was important in predicting the likelihood of that person leaving the parental household, the study found.
The authors found no difference in the likelihood of independence between high school graduates and those who hadn’t finished high school. But those with some college education were somewhat more likely to move out of their parents’ home.
“While people’s capability to pay for housing is relevant, housing cost and its change over time are undoubtedly important factors that affect young adults’ achieving housing independence,” the authors wrote.
Achieving household independence became increasingly more difficult as the young adult grew older, even when local rents declined, the study found. Social norms about the acceptability of living with one’s parents also affect whether young adults move out.
Household size and marital status were significant factors in some individual cases, but those factors were less important than local rent changes, age differences and earning capacity.
The authors concluded that the distribution of personal income among young adults and the area cost of living greatly affect the pattern of young adults’ household formation, yet the share of low-income young adults and of those who continued living with their parents didn’t significantly increase between 1985 and 1995.