Economic concerns are leading more than half of young buyers to look at the income-earning potential of future renters as they search for a home, a report from Zillow found.
House hacking, the trend in which homeowners rent out either part or all of their property to earn extra cash, emerged as a key consideration among successful buyers, especially millennial and Generation Z consumers. Fifty-five percent of millennials and 51% of Gen Z who had purchased a home called the option to rent out at least part of it as "important" in their search.
The shares far outpaced the 36% and 4% numbers among Generation Z and baby boomers. Overall, 39% of successful buyers ranked house hacking as important.
The data shows the stark difference in generational approach to the housing market, the report said. "Younger homebuyers — mostly Gen Z and Millennials — are especially into the idea of rental income as a key factor in their home buying decisions," said senior population scientist Manny Garcia in a press release.
"For those first-time buyers navigating the 'side hustle culture,' where a regular 9-to-5 might not quite cut it for homeownership dreams, rental income can step in to help with mortgage qualification and smoothing out those monthly payments," Garcia noted.
When it comes to possibly renting out an entire purchased home, the numbers skewed even higher among younger consumers, with 59% of millennials deeming it important. A majority of 54% of Gen Z buyers expressed similar views. By comparison, only 40% of Gen X and 8% of baby boomers thought renting out a house was important, with the share across all age groups of successful buyers at 43%.
Among the set of prospective future homeowners, the opportunity to rent out an entire home for extra income was seen as valuable by even higher percentages. In total, 55% called it important, with shares of 64% and 56% coming from millennial and Gen Z populations. A majority of Gen X, or 51%, also agreed, along with 23% of baby boomers.
The research reflects the impact decreasing affordability has had on the housing market over the past two years, particularly for those entering home buying age. In September, median new loan payments had increased by 11% year over year and by more than 17% from 24 months ago, the Mortgage Bankers Association recently reported.
Rising interest rates and scarce housing supply are diminishing current home buying enthusiasm as well, according to another recent consumer survey from Freddie Mac. Researchers at the housing finance enterprise found a record high 85% of consumers in October thinking it was a bad time to purchase a home.
But reports also consistently see a sizable portion of the Gen Z population recognizing the value of homeownership, with almost 30% prioritizing a purchase in the next 5-10 years.
In addition to overcoming rate and payment hurdles, buyers today face competition for the limited number homes available, increasing the pressure to come up with a sufficient qualifying down payment and underscoring the value of extra income sources.
Zillow's survey found the lack of home affordability impacting minority buyers more acutely. Renting out an entire home was important to 57% of successful Latino buyers and 51% of Black households compared to 42% of white consumers.
