Jan 11, 2026
As the prospect of homeownership slips away from young Americans, many are exhibiting financial behaviors that could have economic consequences down the line, according to new research.
Those who are resigned to being forever renters are more inclined to spend, slack off at work and take on risky investments, as posited by Seung Hyeong Lee of Northwestern University and Younggeun Yoo of the University of Chicago (1).
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“When housing becomes unattainable, people do not simply stay renters — they often change how they live, work, and plan for the future,” the pair wrote in an early-stage research paper posted online in November. “These changes compound over time and can reshape the economy.”
The two researchers developed a life-cycle model that projected those born in the 1990s will enter retirement with a homeownership rate 9.6 percentage points lower than their parents. The model also suggested that by the time these 90s babies turn 30, 15% may already have given up on buying a home.
Spend, spend, spend
What do young Americans convinced they’ll never be able to buy property do with their money?
According to Lee and Yoo, when young Americans withdraw from the aspiration of buying a home, they spend money they otherwise might have put toward savings.
“We find that when home prices rise to the point where renters can no longer afford to buy a house within the foreseeable future by saving their wages, renters give up on home purchases and instead use their savings to increase consumption,” they wrote.
Renters who are less likely to purchase a home are more likely to slack off at work, according to Lee and Yoo. Among renters with a net worth below $300,000, the share reporting low work effort is 4-6%, nearly twice that of homeowners. Meanwhile, renters with a higher net worth — still plausibly on track to buy a home — report similar or slightly lower figures than homeowners.
“As the perceived returns to labor (in terms of progressing toward homeownership) diminish, so does the value they place on maintaining high work effort,” the researchers wrote.
At the same time, renters for whom homeownership is more out of reach seem to have a higher appetite for risk when it comes to investments. For example, cryptocurrency, a notoriously volatile investment, is an easier sell to renters than homeowners who have a net worth below $300,000, while things are more even out between the groups above this threshold.
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“Renters with a plausible path to homeownership may exhibit lower risk tolerance, as significant losses could derail their progress toward that goal,” Lee and Yoo wrote. “In contrast, those who have already given up on homeownership may perceive they have less to lose, and therefore engage more willingly in risky financial behavior.”
The researchers add: “Households that give up tend to begin with relatively low wealth, and the behavioral responses that follow — reduced work effort, higher consumption relative to their resources (especially at younger ages), and excessively risky investment that often results in losses — make it even harder for them to escape low-wealth trajectories. By contrast, renters with higher probabilities of eventually becoming homeowners behave very differently: they work harder, save more and take less risk, widening the gap between those who retain hope and those who do not.”
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Ways renters can build wealth
Being a forever renter doesn’t necessarily mean you’re shut off from building wealth. Here are some ways to boost your bank account and even build a retirement nest egg.
Invest as automatically as homeowners pay the mortgage: Renters can have more liquidity available for investing than homeowners, especially if they opt for a cheap rental and live frugally. Habitual saving and investing, similar to a homeowner paying a monthly mortgage, can operate as a “forced savings” technique that can help you accumulate wealth in the long run.
Boost contributions to retirement accounts: Contributing to tax-advantaged retirement accounts such as a 401(k) is a good way to build wealth as the money in these accounts can be invested and grow over decades. If your workplace offers a matching contribution program, even better. Automatically diverting a portion of your paycheck into a retirement account is yet another forced savings strategy.
Look to REITs for real estate gains: Renters can still get into the real estate market without the high upfront costs by investing in companies that own and operate income generating properties. Investing in a REIT can provide passive income while retaining liquidity.
Article sources
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Social Science Research Network (1)
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Libby MacDonald is a Senior Staff Reporter at Moneywise. She has extensive experience in business and consumer reporting, having covered topics including insurance, wealth management, housing and equities.
