By Michael Moran

Perhaps I should forgive the Washington Post for this transgression in the midst of an impeachment trial. The Post, after all, cut its teeth on the topic during the Watergate affair, so it’s not surprising that its editors and headline writers are a bit distracted.

But I have to say, this kind of thing bothers me. The sub-headline (see below) on an otherwise interesting piece on the trend that sees Millennials buying far fewer homes than previous generations is downright ignorant:

“Because homeownership is the chief builder of wealth, the trend is ‘bad news for the economy”

Thank you, Washington Post, for doing exactly no analysis and instead taking your queue straight from the marketing department of the National Association of Realtors.

An Important Distinction

In fact, as many of the savvy investors know, it is not “homeownership” but rather “real estate ownership” that is the chief generator of wealth in the United States these days. Indeed, at this point in the cycle, a good argument could be made for steering clear of a single-family home purchase, especially for Millennials entering that segment for the very first time. Unlike an investment in, say, a value-add multifamily syndication, purchasing a home tends to tap far too much of the investable income of the buyer.

As 2008-2009 demonstrated, sinking your nest egg into your primary residence – especially late in an economic cycle – can lead to disaster. Many of these same millennials being subtlety mocked for not doing so in stories like this one have vivid memories of the life-and-death struggles their parents went through not very long ago, whether they had to pull kids out of college, sell into the downturn, or drop their keys in a mailbox walkaway. Is it any wonder, really, why Millennials don’t want to take that on?

Of course, there’s far more at work here than bad memories. Post-crisis mortgages are much tougher to come by, and the expanding population of the “gig economy” don’t qualify. Home prices, reacting in part to that tight credit environment, have grown exponentially since the Great Recession officially ended  (technically in June 2009). Taking Denver, my city, as an example, single-family home prices rose 80 percent since then, according to a report by Attom Data Solutions released last August.

Then there are the diminishing tax advantages to owning and paying interest on a mortgage. Property taxes will only go up, and insurance will too. Yet the most recent federal tax reforms – which made investing in multifamily properties even more attractive than before – eviscerated single-family tax benefits by eliminating the longstanding ability to writeoff all state property taxes. This hurts folks in low tax states much less, of course, by taken as a whole, the real damage is to the homeownership model generally.

Another factor is the cultural shift among many Millennials away from the suburban lifestyle, a preference for what urban studies theorist Richard Florida calls “youthification,” a preference for vibrant, high-density residential environments. That’s one of several reasons that my firm, PCRP Group, targets such markets. They are incubators of jobs and culture – and ultimately investor value.

Getting Real About Real Estate

But it’s the shoddy arm-chair economic analysis that really goads me. Yes, of course, the middle class has historically built wealth since World War II through the appreciation in the value of their single-family homes. But in today’s environment, that observation is no longer very useful.

For one thing, as mentioned above, the “middle class” no longer has the easy access to homeownership they did during the salad years of the late 20th century.

Think about the Denver example: Did incomes in Denver rise by 80 percent to compensate for the dearer cost of housing? Hardly. Indeed, income hardly budged at all for the middle class. Median US family income in 2007 was $62,700, according to the US Census Bureau. Today, it’s $63,200.

And as The Economist magazine recently noted that buying a home is no longer the ticket to prosperity it once may have been. Given these realities, the fact that Millennials – and I suspect, the Gen Y and Z’ers who follow them – are migrating away from the picket fence world of our grandparents is a sign of financial intelligence.

So Millennials – and I suspect, the Gen Y and Z’ers who follow them – are migrating away from the picket fence world of our grandparents. This should be seen as a sign of financial intelligence and risk management, not a disaster. Saddled with college debt, facing rising home prices at the top of the market, we should not blame them for deciding to stay nimble. The fact is the rental market in most MSAs remains more attractive than single-family for a young family for a variety of reasons. The idea that we should worry about the impact this will have on our economy or society in the long run is absurd. This is a healthy sign that Millennials are managing risk and viewing the “American Dream” through a clearer lens, one that requires them to be realistic about what they can afford, the life they really want to live, and the housing choices that are within reach.

Yet The Post’s tone remains apocalyptic.

If that trend continues, the paper intones, ‘“we’re looking at a generation that will have lower lifetime wealth,” said Jenny Schuetz, a housing policy expert at the Brookings Institution. “That’s bad news for the economy overall, not just millennials,”’ she added. Homeownership, she wrongly asserts, is the chief builder of wealth for the middle-class.

In fact, Millennials ­– or anyone else, for that matter – who take part in multifamily investment opportunities as Limited Partners have access both to the reliable appreciation of this class of housing, which is undersupplied and in high demand, as well as unprecedented tax advantages of this investment vehicle (see my recent post, Inevitable? Well, Death We Can’t Help You With. Taxes Are Another Story).

All in all, we at PCRP Group are quite comfortable with this trend. Besides the overbuild luxury “A” class of apartment buildings, there’s a major shortfall in desirable multifamily apartment dwellings in most of the markets we feel warrant long-term attention – a shortfall that will take a decade or more to fill even if municipal, state and federal incentives ever align to encourage such development. For our investors, this means appreciating values, high occupancy rates and rising rents. Supply and Demand is a beautiful thing.

Michael Moran is Managing Partner at PCRP Group – Preferred Climate Resilient Properties. Learn more about our risk weighted, climate resilient approach to multifamily investing at