The number of young adults on Long Island is on the rise, according to recent data from the U.S. Census Bureau, but a new study finds that it’s taking longer for them to afford living on their own.
A recent report by the Long Island Association found that millennials—men and women between 25 and 34 years old—are in dire straits when it comes to buying or renting homes, and that is having a significant impact on the region’s economy, which is the nonprofit association’s chief concern.
Long Island Association CEO and President Kevin Law said the South Fork will feel the squeeze the most—even as the housing market appears to be softening and prices seem to be leveling off, if not falling significantly.
“A shrinking household formation—not necessarily a family, but a group of individuals living together or independently in a separate residential housing unit—has had significant impacts on our economy,” Mr. Law said in a recent interview. The report found the declining number of households caused an annual decline of $707.2 million for Long Island’s overall economy.
“Millennials are facing this problem nationally, but those problems are more acute on Long Island because of the higher cost of living—and they are extremely acute on the East End, because the real estate market has gone crazy over the last two decades,” he continued. “It means fewer people going out to local hardware stores and renovating an apartment or improving a house, and spending money on a lawyer to do a closing for them and review a lease for them—it has a ripple effect on the economy.”
The regions that experience the brunt of the suggested economic downturn are areas where home prices have increased the most, leading to a sharper decline in young people owning or renting homes, Mr. Law said.
A separate study by Zillow Group in September reported that millennial renters and homeowners are finding it increasingly more difficult to trade up. Because of major life events, including marriage, childbirth, changing jobs or relocating for work, the stress and large expense of moving makes it hard to buy a new home—not to mention the added headaches of making necessary improvements to sell, selecting an agent, hiring a real estate lawyer and uprooting the household.
“Those are things we are just not going to change,” Mr. Law said. “When looking at our stats, young people are putting marriage off until much later than they used to in the past. Women are putting childbirth off. Those two are key factors when considering when to form a household, and trade up.”
As for why millennials might want to move, the Zillow study found nearly a third of millennial renters and homeowners are living in an area they don’t want to live in, making the decision to settle down in areas with more affordable options.
Hoping to move to more desirable locales, which offer shorter commutes, bigger homes and higher-end finishes, millennials are often willing to make concessions to sell their homes, such as significantly reducing the asking price and paying some of the closing costs to complete a sale—but more than half of their offers fall through, the study said.
Many are stuck in leases that they can’t pay their way out of: Nearly half of millennials can’t cover an additional expense of $1,000 in a given month, especially as rent increases. If millennial renters are looking to buy, more than half of them cannot afford a 20 percent down payment on their own, and many turn to family and friends to cobble together funds to buy a home.
Meanwhile, millennials’ wages have dropped off, according to the Long Island Association report. With financial woes, some millennials opt to move back home to save.
Zillow Chief Economist Svenja Gudell, who oversaw the Zillow study, said she expects millennials will rebound soon due to a softening real estate market.
“As hectic and stressful as the process can be, most sellers still go on to buy another house, and, if past is prelude, they’ll find themselves back in the market as sellers in another decade,” Ms. Gudell said in a statement.
The Long Island Association report made some recommendations.
“Everyone is focused on a particular project or a particular tax issue—broader themes,” Mr. Law said. “No one is really taking a look at how our demographics are changing, and it’s our demographics that present the most significant challenges for the region in the future.”
For the past four years, the association’s research arm has projected increasing poverty rates and a shrinking middle class on Long Island and offered recommendations to elected bodies to make policy changes to reverse startling trends.
In terms of restrictive policies, rent control is out of the question, Mr. Law said. “You could kiss real estate investments in the Hamptons goodbye if that was the case,” he added.
What Mr. Law is calling for is more affordable housing and diversity in housing supply in vibrant downtowns with public transportation options on Long Island, especially on the South Fork.
“Not to stereotype them, but many millennials do not want a single-family home or the headaches that go with homeownership,” he said. “There is more interest in rentable multifamily housing.”
He cautioned that not every location is suitable for multifamily housing. “You don’t want to put a whole bunch of multifamily housing units in the middle of a farm or woodlands,” he said. “You don’t need to jettison conservation efforts to have meaningful development. It needs to go where it makes sense.”
Mr. Law said the Long Island Association is ramping up its influence on the South Fork to strengthen the Long Island workforce.
“We are hoping to help create jobs on the East End,” he said. “We want to grow an innovative economy, because it’s a whole lot more than fishing and farming. There’s a lot of smart people [and money] out there.”
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