Today’s young adults—millennials and, increasingly, the oldest members of Gen Z—are entering homeownership at a slower rate than prior generations. Rapidly increasing home prices, limited housing supply, and the rising cost of mortgage financing mean more young people are delaying household formation and struggling to transition from renting to homeownership.
In a new analysis, we find that the homeownership gap between young and older adults has widened since 1980 and is largest in high-cost metropolitan areas. Today, fewer young adults living in these “superstar cities” own homes or form independent households. And markets with more rapid home price appreciation have seen declines in the share of young adults in recent decades.
To help young adults build wealth and form independent households, policymakers could explore demand- and supply-side interventions that could expand young adults’ access to homeownership, particularly in these high-cost markets.
High-cost cities have the largest homeownership gaps between young adults and older adults
For this analysis, we focus on young adults ages 25 to 35. We exclude adults younger than 25 to account for changes in college enrollment in recent decades and to better capture the period when young adults are establishing independent households and pursuing homeownership.
Nationally, 43 percent of households headed by someone ages 25 to 35 owned their home in 2024, compared with 79 percent of those headed by someone age 65 or older. Although older households historically have higher homeownership rates, the gap has widened from 17.5 percentage points in 1980 to 35.8 percentage points in 2024.
This gap is largest in metropolitan areas with the highest median home values. Many of these markets offer high-paying jobs and desirable amenities (earning them the name “superstar cities”), but rising housing costs have made homeownership increasingly difficult for younger households. Older homeowners, meanwhile, often purchased homes when prices were much lower and have accumulated substantial equity.
Over time, the gap has widened most in high-cost cities. For example, between 1980 and 2024, the difference in homeownership rate between young and older adults increased by 22 percentage points in San Francisco, 23 percentage points in New York City, and 29 percentage points in Denver, compared with 18.3 percentage points nationally.
The growing divide reflects both younger households’ difficulty entering homeownership and higher ownership rates among older households, though homeownership rate changes among each generation vary by market.
In Denver, older households’ homeownership rate rose from 67 to 78 percent, while younger households’ rate fell from 55 to 37 percent. In New York City, younger households’ rate declined only slightly, from 28 to 26 percent, while older households’ rate rose from about 43 to 63 percent.
The share of young adults in high-cost markets has remained about the same, but their housing arrangements have changed
Superstar cities generally offer jobs with higher income opportunities and have amenities—such as cultural institutions, public transit, and social activities—that attract young adults. The share of young households living in these markets increased slightly between 1980 and 2024, from 28 to 31 percent.
But this increase partly reflects a broader population shift from rural areas to urban areas.
Although their geographic distribution has changed relatively little, young households are less likely to own their homes. In high-cost markets, their homeownership rate fell from 40 percent in 1980 to 32 percent in 2024, compared with a national decline from 53 to 42 percent.
Perhaps most striking is the reversal in where young adults are most likely to form independent households.
In 1980, the share of young adults who were household heads was slightly higher in high-cost markets than nationally. By 2024, high-cost markets had the lowest share (41 percent). Young adults continue to live in these markets but increasingly do so by sharing housing with parents, other relatives, or roommates rather than establishing their own households.
Though the share of young adult households in high-cost cities has not changed much since 1980, today’s young adults are sensitive to rapid price appreciation.
Markets where home price appreciation has been highest over the past decade are seeing declines in the share of their population that is young adults. This pattern exists regardless of whether a market is high cost, indicating that young adults may be reacting more to price movement than overall cost.
How policymakers can help more young adults become homeowners
Superstar cities remain desirable places for young adults despite their high housing costs, but opportunities for homeownership in these markets have narrowed. This matters because delayed entry into homeownership can have lasting implications for wealth building and household formation.
Closing the widening homeownership gap between generations will likely require policies that expand opportunities for young adults to buy homes in these high-cost markets. To do so, policymakers should consider both national and localized solutions to address both the supply and demand for homes.
Alongside implementing the ROAD to Housing Act (which primarily focuses on expanding housing supply), policymakers could address the challenges young adults face by considering an increase in the federal capital gains tax exclusion for primary residences. A higher exclusion could reduce the tax liability associated with selling for longtime homeowners in high-cost markets, where homeownership gaps between older and younger adults are often particularly large. This could encourage some older owners to sell, potentially making more existing homes available for purchase for younger buyers. How many additional homes would enter the market—and whether they would be affordable and suitable for young buyers—remain empirical questions.
To help more young adults afford homeownership, policymakers and national regulators could improve access to financing for the purchase and renovation of condominiums and co-operatives. These properties can offer a less expensive path to homeownership than detached single-family homes, particularly in dense, high-cost markets, but financing restrictions can limit access. Direct homebuyer assistance, including down payment grants and interest rate subsidies that reduce monthly payments, could also help young households purchase homes in these markets.
By removing barriers to homeownership for young adults, policymakers can help ensure this key method of building wealth remains accessible to future generations of Americans.
