House Hacking Popular Among Young Homeowners
How Gen Z and Millennials are tackling the home buying process.
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The housing market has become a challenging terrain for Gen Z and Millennials, prompting innovative approaches to homeownership. A rising trend, known as “house hacking,” involves renting out a part or the entirety of one’s property to generate extra income, according to CNBC.
In a recent report from Zillow based on a survey of over 6,500 recent homebuyers between April and July 2023, 39% consider house hacking a crucial opportunity, marking an 8% increase over the past two years.
With the median home price in the United States reaching $413,874 in October, up 3.5% from the previous year, and 30-year mortgage rates hitting 8%, the affordability crisis has spurred interest in house hacking, particularly among Millennials (55%) and Gen Z homebuyers (51%). Manny Garcia, senior population scientist at Zillow, notes that the additional income from house hacking can turn homeownership dreams into reality amid affordability constraints.
However, the feasibility of house hacking requires careful consideration. While it can offset the higher costs of a home, potential buyers, facing the necessity of a $114,627 annual salary to afford a median-priced house, must factor in various considerations. Daryl Fairweather, chief economist at Redfin, emphasizes the importance of options for young buyers facing the challenge of limited small starter homes.
The house hacking trend might be time-sensitive, as new apartment buildings under construction could increase rental options, impacting the potential income from house hacking. Rental market inflation has cooled in 2023 due to increased inventory, with the rental vacancy rate reaching 6.6% in the third quarter, the highest since early 2021.
Despite a growth in available apartments, Zillow’s Garcia warns of a massive shortage of housing, especially affordable options. While renting out a portion of a home can provide additional income, potential buyers must still demonstrate the ability to afford the mortgage without relying on rental income, as banks typically do not consider it in financing decisions.
Buyers interested in house hacking should conduct thorough research, consulting rental managers for advice on pricing and ensuring compliance with local ordinances or homeowners association regulations. As the housing landscape evolves, the short-lived opportunity for house hacking underscores the need for prospective buyers to act strategically and responsibly in navigating the market.
Noumaan Faiz, (he/him) is a journalist and entertainer from Hayward, CA who covers culture and entertainment.
Edited by Nykeya Woods