Achieving the American Dream has long meant owning a home, but today, that idea may be doing more harm than good, particularly for Millennials. Homeownership has traditionally symbolized that a person was established, both financially and socially. And until just earlier this century, it was viewed as a sure-fire way to build wealth. Unfortunately, it’s becoming more difficult. For example, buyers have to take on much more debt to purchase a home than they did 10 years ago. Research from Experian reveals that Millennials (or those born roughly between the early 1980s and the late 1990s) hold a whopping average of $222,211 in mortgage debt, a 5% increase from the first quarter of 2018 and one of the largest increases by any generation within the past year.

What does this mean? For many in their twenties and thirties, the requirements for homeownership are simply untenable. It is an unfortunate position for would-be buyers, but it represents an opportunity for landlords. Excluded from the homeowner market, Millennials still need a place to live. By examining the millennial generation and its intersection with the economy, the recent history of the housing market, and other cultural and financial trends we can uncover specific opportunities for landlords to thrive.

Let’s dig in a bit.

Millennials are Scarred from the Great Recession

Who is this group? We often think of Millennials as avocado-toast enthusiasts who are killing everything from golf, cable TV, and cereal (enter the avocado toast) to cruises, napkins, and the 9-to-5 workday. Millennials make up 25% of the U.S. population, they represent 2/5s of the workforce, 1/3 of eligible voters, and they are some 75 million strong. They are no small faction of American life! Again, these folks were born roughly between the early 1980s and the late 1990s, which means that many of them came of age or had a significant part of their early lives impacted by the economic downturn of the late 2000s, and this has absolutely impacted their relationship (or lack thereof) with homeownership.

If Millennials don’t own a home, then they rent, lest they move back in with mom and dad. For many Millennials reading this, the very idea may cause an involuntary, shudder-inducing flashback to that moment 10 or so years ago when they realized that the economy really was in a tailspin, that they wouldn’t be able to afford independent living after college, and that the basement at their parents was their only real option. The horror.

And, case in point: Millennials are still recovering psychologically from the Great Recession. That, in combination with their fiscal reality, is preventing many of them from plowing forward boldly with home purchases – like their parents and the Gen Xers before them. Vox reports that Canadian Millennials still consider home purchasing to be a reliable method of building wealth, but that’s because they didn’t witness the bubbling and collapse of the housing market like American counterparts. Even more than getting married or having children, American Millennials want to buy a house, but they distrust that a home is a reliable investment.

 What this means for landlords: Clearly, it’s possible that an increasing number of renters will continue to rent and build wealth in other ways. It’s also possible, given the current climate, that some Millennials could forgo homeownership altogether. That means the rate of renters isn’t likely to decline anytime soon, making this a good time to be in the renting business. For the creatively inclined, it is also an opportunity to experiment with alternative lease and sale structures. For example, given Millennials’ interest in homeownership, rent-to-own properties become increasingly compelling. Likewise, seller-financing, when done right, can be a lucrative way to forego the bank as an intermediary.

The Recession, School, and Rent are Pinching Millennial Wallets

The psychological aftermath of the financial crisis isn’t the only thing preventing Millennials from taking the homeownership plunge. The economy has had some time to recover from the Great Recession, but wages are not rising at the same rate as inflation, which means that many people, Millennials included, don’t personally feel the boost in the economy. Add to this problem that Millennials are burdened with staggering amounts of student debt, and it’s no wonder that they struggle to save for a home. Student debt affects Americans of every generation, but none more than this group. Upward of 15% of Millennial salaries go toward paying student loans each month.

High rent prices make it hard for them to save for high-ticket items like down payments as well. The strain of high rent is felt everywhere but most acutely in spots that are close to jobs, like urban centers and certain regions of the country (like San Francisco and New York), for instance. As a result, apartments and other rentals are a hot commodity and options are few. The high demand and short supply result in steep rent prices.

What this means for landlords: Obviously, if you are a landlord who is supervising rentals in these veritable employment hot zones, then business is probably booming. Opportunities are available for those looking to expand or get set up in these areas too. While the construction of new apartments and other living spaces is certainly one way to address the supply shortage,

Millennials Invest in Experiences and Alternative Assets

We can’t write about what motivates each Millennial, but patterns are interesting. These guys and gals tend to make a priority of their savings accounts. After all, homeownership is not the only way to build wealth. In addition to that proclivity for long-term saving, this crowd also prioritizes higher education, which some consider a form of long-term investment, despite the struggle to manage debt from student loans. Of course, it’s also widely known that Millennials value experiences over physical objects, and they would rather spend their money on those experiences than on collecting material items.

What this means for landlords: Cool experiences are having a bit of a moment, and it is reshaping retail everywhere. Landlords have as much an opportunity as anyone to ride the wave. If a sizeable block of your potential tenants craves cool experiences, what can you offer them in addition to your units that could entice them to rent? You could host swanky parties in your common areas or invite guest speakers to come and chat with your tenants or run workshops on topics of interest. You could hire anyone from influencers, financial advisors, and sustainable living experts to professional chefs. With this generation’s eagerness to share their experiences and opinions, you may even find your efforts rewarded in the form of free marketing. Additionally, reaching out and collaborating with local vendors or attraction providers can be a great way to offer discounts for your tenants (kayak rentals, rock-wall climbing, boat rentals, off-roading, theme parks, art classes, yoga, theater performances, event tickets — the sky’s the limit!). And, don’t forget the amenities you offer. If you are looking at upgrading or increasing those offerings, think about how your region and building lend themselves to specific experiences.

Nothing Exists in a Vacuum

You may have spotted that there is overlap in the potential opportunities we’ve outlined. None of what we’ve discussed exists in a vacuum, so no avenue of discussion here should be considered in isolation from anything else. That Millennials crave experiences, for example, should not be considered in isolation from the broader context of their financial health and well-being nor from the renting landscape as a whole. Millennials may think that commercial properties that have been converted to residential properties are cool and make for a more novel living experience (the apartment from the popular TV show “New Girl” comes to mind). Or, while it may not strike as the flashiest, most exciting experience at first blush, events that your building hosts with financial coaches and other wealth advisors may be attractive to Millennials. This group craves experiences and smart investments, so the experience of learning from a professional on how to take financial advantage of renting in a seminar or at a landlord-sponsored meet-and-greet might genuinely appeal to them.

The Bottom Line: Opportunities Abound for the Creative, Entrepreneurial Landlord

There’s no guaranteeing these conditions will last forever. As Baby Boomers age and pass away, their Millennial children may be able to buy down the cost of a home with money they receive from their inheritances. This could have an impact — Boomers, after all, own 4 in 10 of the houses in the United States. And, while traditional homeownership may continue to stagger for this lot, Millennials may seek alternative options that fuel their desire for adventure and are more financially manageable. Opportunities for those Millennials bent on ownership include townhouses, tiny homes, and other less-traditional properties. Plus, the economy will always have its ups and downs, and that can impact the housing (and therefore) renting industries.

While Gen Z may bring a new mentality to the table, landlords have a prime opportunity to capitalize on Millennial renters in the current landscape. The bottom line is that there are at least a few ways landlords can leverage the housing climate to their advantage. One, it’s a good time to be in the renting business or to get into it because so many are renting where traditionally they might otherwise have been buying homes. Two, the scarcity of living options for people migrating to employment hot zones mean that renters need to think creatively about the options they can offer — and the conversion of commercial properties to residential spots is an opportunity for landlords in these target-rich areas. Three, landlords can capitalize on Millennials’ craving for experiences over collecting material items. The key to making your units attractive to this group may lie in packaging the living space with exclusive, experience-rich opportunities.