A new study suggests younger generations are taking riskier financial bets and spending more freely as they give up on the traditional American dream of owning a home.
Research by Northwestern’s Seung Hyeong Lee and the University of Chicago’s Younggeun Yoo, published in “Giving Up: The Impact of Decreasing Housing Affordability on Consumption, Work Effort, and Investment,” highlights the steep decline in housing affordability over recent decades. Their model predicts that people born in the 1990s will retire with homeownership rates about 9.6 points lower than their parents’ generation. As households see their chances of owning a home drop, the study finds they tend to spend more of their income, work less, and take on riskier investments.
“We find that, among households with net worth below the median U.S. house price, renters tend to spend more on credit cards, exert less effort at work, and participate more in cryptocurrency markets relative to homeowners with similar wealth,” the researchers wrote.
The study found similar behavior among low-wealth renters, warning that these patterns will compound over time and significantly widen the wealth gap between those who keep pursuing homeownership and those who give up. Lee and Yoo recommend subsidies to help more young renters keep trying to advance, arguing this approach boosts well-being more effectively than universal payments or aid limited to the poorest 10%. They say it would also increase homeownership, encourage work, and reduce reliance on government assistance.
Lee and Yoo argue that subsidizing young renters so they don’t abandon the goal of moving up economically would boost well-being far more than universal payments or aid limited to the poorest 10%. They say it would also expand homeownership, encourage work, and reduce reliance on government support.
Buying a home has become far more difficult for the average American in recent years. The affordability crunch began around 2020 and worsened through 2021–2022 as home prices soared, mortgage rates jumped, and inventory stayed tight. With interest rates now high, the market has barely moved: homeowners don’t want to sell and lose their low-rate mortgages, while buyers face scarce listings and costly loans.
