In high-cost MSAs, the median rent climbed 29 percent, from $1,289 in 2005 to $1,660 in 2024, with the sharpest increase between 2022 and 2024. In low-cost MSAs, rents rose 17 percent over the same period. In 2024, the affordability gap between high- and low-cost metropolitan areas reached its widest point since 2005.

In 2005, the share of young adults living with their parents ranged from 10 to 13 percent across low-, mid-, and high-cost MSAs. This share increased everywhere, reflecting unstable labor market conditions following the Great Recession and increasing barriers to homeownership.

But the increase has been most pronounced in high-cost areas. By 2017, more than a quarter (26.3 percent) of young adults in high-cost MSAs lived with their parents, compared with 18.7 percent in low-cost MSAs.

Although shares across all tiers have declined since 2017, they remain elevated. And the differences in shares across tiers have widened. In 2024, the difference in the share of young adults living with parents between high- and low-cost MSAs was 5.8 percentage points, up from 5.4 percentage points in 2017. That’s substantially higher than the gap in 2005 (0.2 percentage points).

Additionally, with rising interest rates, higher rents, and greater labor market uncertainty for young adults, the share of young adults living with their parents has increased since 2022, underscoring how housing affordability and economic conditions affect household formation.

Further, we find that even young adults with high incomes are not insulated from these trends, though young adults with low incomes show far greater increases in the share of young adults living with parents.  

Within every income group, young adults are more likely to live with their parents in high-cost MSAs than in low-cost ones. Among young adults earning less than $20,000, roughly 34.7 percent of those in high-cost MSAs lived with their parents in 2024, compared with 26.6 percent in low-cost MSAs.

Those in the lowest income bucket living in high-cost MSAs show the greatest increase in the share living with parents, a 16.4 percentage-point increase between 2005 and 2024. For those in the highest income group, the increase was greater in higher-cost areas but went up only 2.7 percentage points in the most expensive areas, showing a widening gap across income groups. This pattern is likely driven by housing costs increasing relative to income.

More effective, evidence-based policies could help young adults achieve housing independence

Urban Institute research shows that young adults who live with parents between the ages 25 and 34 are much less likely to form independent households and become homeowners a decade later, compared with those who move out earlier as renters or as homeowners. As such, the rise in young adults living with their parents is likely to affect their ability to become homeowners and build wealth in the long term.

This matters not just for today’s young people but for the US economy as a whole, as those who purchase homes later in life have lower housing wealth near retirement. 

Our findings have several implications for state and federal policymakers looking to help more young adults move toward financial independence and homeownership.

• The problem is concentrated in high-cost areas, so solutions should be too. Relaxing restrictive zoning codes, legalizing smaller and denser housing types (e.g., accessory dwelling units, duplexes, and small multifamily buildings), and streamlining housing development approvals in high-cost MSAs would expand the precise market segment that serves as the first rung on the housing ladder.
• Policies that subsidize housing for renters and first-time homebuyers are insufficient to close the gap between low-cost and high-cost areas. Supply-side actions are also needed. Though demand-side tools such as rental assistance and down payment support are valuable, our results suggest they will be most effective when paired with efforts to expand housing supply in the markets where the problem is the worst. Used in isolation, demand-side tools will be partially absorbed by higher housing costs where supply cannot respond. The widening gap across income groups also demands attention; actions to increase supply—especially more affordable, entry-level homes—will help to bridge this gap.
• This trend reflects the broader affordability challenges young people face, which means policy can shape it. Young adults’ living arrangements are not fixed; they are a response to financing, labor, and housing market conditions. This dynamic cuts both ways. Continued cost and rate pressures in expensive MSAs will likely push co-residence back up, while policies that genuinely improve affordability—whether by lowering financing barriers or expanding supply—could help household formation rates recover more quickly.

Researchers can help inform effective, targeted policies by doing the following:

• Tracking household formation as an outcome: Housing policy is typically evaluated against production targets and affordability ratios. Our findings suggest that a complementary yardstick—the share of young adults able to form independent households, by MSA—could help capture how young adults are responding to affordability challenges.
• Examining how housing affordability and young adults’ living arrangements interact with labor markets and other demographic trends: Further research could analyze whether rising housing costs and job market conditions are encouraging young people to move from high-cost regions to low-cost regions or to delay moving altogether.
• Exploring the interplay between housing affordability, delayed marriage, and household formation: Although the average age at first marriage has increased substantially over the past two decades, high housing costs themselves could contribute to delayed marriage by making it harder for young adults to establish independent households. Understanding these relationships is critical for assessing the long-term effects of housing affordability on family formation and economic opportunity.