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- We’re entering the 2020s with an affordable-housing crisis that shows few signs of letting up and an ongoing debate about whether millennials aren’t buying houses at the same age as their parents because they can’t afford it — or because they just prefer not to.
- Business Insider spoke with eight real-estate experts about their predictions for the housing market in 2030. We asked them who would rent, who would own, and how the housing affordability crisis could be solved.
- More than one-eighth of millennials believe they’ll rent forever, a symptom of a larger trend toward renting. Most of the experts we spoke with believe more people will be renting in 2030.
- Read more BI Prime stories here.
Millennials have been blamed for killing countless industries.
By 2030, the oldest millennials will be 49 and solidly middle age. By then, we will know if they’ve truly killed homeownership.
We’re entering the 2020s with an affordable-housing crisis that shows few signs of letting up and an ongoing debate about whether millennials aren’t buying houses at the same age as their parents because they can’t afford it — or because they just prefer not to.
Business Insider spoke with real-estate experts about the housing market in 2030. We asked them to predict who would rent, who would own, and how the housing-affordability crisis could be solved.
For a separate story, we also polled experts about what real-estate brokerages and jobs would look like in a decade. You can read that full story here.
Rent or own?
More than one-eighth of millennials believe they’ll rent forever, a symptom of a larger trend toward renting. And most of the experts we spoke with believe that more people will be renting in 2030.
Dror Poleg, the author of “Rethinking Real Estate” and the cochair of the Urban Land Institute’s Technology and Innovation Council, believes that we will see more renters in 2030 than we do now but that renting may look a little different.
“We’re going to see more real estate consolidated under large rental platforms that allow people to rent forever,” Poleg said.
These platforms may be similar to the subscription services that are being tested by some coliving companies, allowing members to move freely between locations. This will match a workforce that Brad Greiwe, the cofounder of the Blackstone single-family-rental company Invitation Homes and cofounder and managing partner of the proptech-focused VC Fifth Wall, says will be more transient.
But age and growing families may bring millennials back to homeownership.
“I think the renting revolution is as strong as it’s ever been, but there always will be demand for ownership,” Ryan Freedman, the general partner at Corigin Ventures, said. “When you reach a different point in your life cycle, you want to be settled. You want your kids to go to school in a good school district.”
Greiwe agrees that homeownership is here to stay but thinks Americans will come to it later.
“I still think there will be a big subset who wants to own the American Dream … they’re just doing it in their 30s instead of their 20s,” Greiwe said.
The largest cohort of the millennial generation just turned 30, which may drive more demand for home purchases.
“We’re very confident in our prediction of growing demand for housing, both owned and rental, for the next 5 to 6 years at least,” Mike Fratantoni, the chief economist for the Mortgage Bankers Association, said.
By 2030, the youngest millennials will be 34.
“Gen Z are a smaller generation than millennials,” Fratantoni said. This may drive down overall demand for housing compared with earlier in the decade.
Wall Street landlords
With renting strong, the trend of institutionalized single-family homeowners, like Blackstone’s Invitation Homes, purchasing more of the market will likely continue.
“I do think you’re going to see increased institutionalization,” Greiwe said. He no longer works with Invitation Homes. He pointed to Invitation Homes’ outsize performance compared with other real-estate investment trusts.
Multiple experts, including Greiwe, agreed that single-family rentals would still be largely owned by local mom-and-pop investors, even though institutional investing may take a larger portion of the market.
“There might be institutional demand but not enough demand to move the sellers,” Fratantoni said. While institutional investors will likely want to purchase more homes, the traditional buyers may not be willing to sell.
While some worry about the effect that this concentration of single-family homeownership will have on household wealth, Jarred Kessler, the chief executive and cofounder of the residential sale-leaseback company EasyKnock, believes that it may make renting a significantly cheaper, and therefore more popular, option.
“The more institutionalized the rental market comes, there’s more economies of scale, and that can be brought down to the consumer,” Kessler said.
Continued migration to the big cities
Changes in housing demand will not be equally spread out. The effects of the sharing economy and a more transient, flexible workplace will bring more people to the largest cities, where renting is more prevalent, according to Arun Sundararajan, the Harold Price Professor of Entrepreneurship at NYU Stern and the author of “The Sharing Economy.”
“A significant fraction of the population will have to migrate from places with less work to places with more work,” Sundararajan said. “This will have a significant impact on the residential real-estate market, in part because the places where the technological change is causing the job process to diminish tend to be places with high rates of homeownership.”
Sundararajan said job opportunities would grow in large cities, like New York and the San Francisco area, and shrink in some small cities. Sundararajan gave Merced, California; Odessa, Texas; Lima, Ohio; and the Oxford-Jacksonville area in Alabama as some of the top examples.
With demand funneling into already expensive metro centers, innovative transportation technology such as autonomous vehicles may make outsize impacts on housing affordability. Clelia Warburg Peters, the president of Warburg Realty and a cofounder of the pioneering proptech venture-capital firm MetaProp, believes that by 2030, we will either be close to autonomous vehicles drastically changing the way cities work, or “we will think it funny we ever thought it was possible.”
“If we move into a world where essentially there are fleets of autonomous vehicles from wherever you are to wherever you want to go, people will start to make very different choices,” Peters said. This could lead to “significant shifts” in how people think about the desirability of certain areas, potentially driving down prices in the densest parts of the most expensive markets.
How tech will try to make the home more affordable
The housing-affordability crisis will continue through the beginning of the decade and potentially longer, according to most of the experts we spoke with. Within real estate, a few startups are trying to offer different kinds of ownership options, and we asked the experts what they thought of some of the models.
One large category of startups focused on affordability straddles the borders of proptech and fintech by using technology to update financial products like rent to own, fractional ownership of homes, and home-equity loans. Some of the experts we spoke with expect these options to gain in popularity, but others were skeptical.
“It’s a model that already exists, and I don’t think what is limiting its growth is technological expertise,” the author Poleg said about rent to own and pointed to the model’s reputational problems.
Fifth Wall’s Greiwe said these models may be able to attract consumers, but once they do, the larger banks will copy them and put these proptech companies out of business.
“It is being driven from the proptech technology side, and unless the banks are going to adopt them, it’s not going to be that impactful,” Greiwe said.
While the financial world provides one opportunity to make housing more affordable, the actual construction of real estate is another place that can drive change. Construction productivity has been flat for decades, and with rising material and land costs, development is even more expensive.
“For the most part, it costs the same to build luxury condos as the type of housing that you want to be affordable,” Beth Mullen, CohnReznick’s affordable-housing-industry leader, said.
Freedman of Corigin Ventures sees three main areas where technology could affect construction costs: shared communication, labor cost, and material costs.
Procore, a construction-project-management software, is an example of where shared communication has already been successful. The SoftBank-backed Katerra is an example of a company trying to save on labor costs by creating prefabricated and modular buildings, though the company has recently canceled projects and laid off workers, according to The Information.
Freedman thinks 3D printing, still in its early stages, will eventually help lower costs. He highlighted certain technologies that create localized formulas for 3D printing based off of materials that can be found near the area of construction.
Technology is not enough
Technology might make a dent in the affordability problem, but all of our experts agreed that it isn’t enough on its own.
“Silicon Valley won’t produce a technology solution that will solve all of our problems,” Greiwe said.
Experts floated zoning changes, public-private partnerships, and regulations that require developers to build affordable housing as some of the mechanisms that could reduce costs. While tech may not solve the housing crisis, we may see more technology companies investing in affordable housing.
CohnReznick’s Mullen highlighted Apple and Google, which have pledged a total of $3.5 billion for California affordable housing this year. While they’re granting money to build housing more generally, it could also help them attract support staff that can’t afford San Francisco’s high rents. Mullen thinks that this trend will likely continue.
How to democratize real estate
With a renting revolution holding strong, and homeownership making up the largest portion of household wealth, what will a more flexible renting world mean for the future of wealth?
Some experts pointed to people making investments in other financial instruments instead of the home, but according to Poleg, it’s a “moot point.”
“Many of the potential young home buyers today don’t have much of a net worth,” Poleg said.
A few of the experts predicted that we will see new real-estate financial products that will allow average investors to invest in real estate in a way that is more tied to where they live, potentially related to new renting platforms.
“I think you’re going to see increased democratization of real estate,” Greiwe said.
- Read more:
- What buying and selling your house will look like in 2030, according to 7 real estate experts
- 12 proptech startups that have won millions in investor backing to upend how you pay for your house
- 2020 could be the first year that millennials originate more than half of all home mortgages
- Developers have zero incentive to fix the affordable-housing crisis. Here’s what one real estate exec thinks could change that.