A hand-up is very different to a hand-out.
Is housing affordability for millennials a realistic dream? Or have they been priced out of the market? It’s a question we have to start asking ourselves as the next generation of adults try to find some answers to the housing affordability crisis. We need to start thinking of innovative ways to get them a hand up into the housing market so they’re not left standing out in the cold.
An Innovative Tenancy Relationship
I recently had a wonderful dinner with three young women in their 20’s. It’s our third dinner together and a relationship that didn’t begin as a friendship; they’re tenants in our rental property.
Five years ago, when we first rented what had been our family home, I made a commitment to rent it to young adults without a rental history. My motivation came from my two adult children, in their early 20’s, who would one day become renters themselves. I was concerned with whether they’d be able to enter into such a competitive and expensive market without a rental history, rental references, and income that would meet the requirements.
I wanted to give some young adults the opportunity to build a rental reputation and history, so that when the day came for them to move on, they could do so with a history of tenancy. However, I didn’t go into it blindly. Giving people a hand up is very different to a hand out. I required a letter of guarantee from their parents, with whom I also had a phone conversation and I checked character and employment references. As long as they at least worked part-time, were working towards a goal and had the right attitude, I gave them a chance. The deal was that they could never default on the rent or be late and there could never be a conversation around money or lack thereof. If they could commit to that, they could move in.
Over the years we’ve had 15 tenants who stayed for an average of 1.5 years. They signed a lease and the bond was deposited with the rental bond board. All the usual requirements were met and, to my delight, achieved.
The Relationships We Formed
One of the most wonderful outcomes about my experience is the relationships that formed over the years. Leases were signed over dinner at our house and property inspections were replaced with dinner at theirs. They would sometimes pop over just to chat, share experiences, ask for my advice about work, life and their future. It was and continues to be a supportive relationship for all.
When each tenant moved on to the next chapter of their life, the house was left clean and a replacement tenant was found, leaving no gap in the rent. They received glowing recommendations and were able to move on to other rental properties. Every real estate agent that called to check their reference expressed how wonderful it was that they had such a glowing reference at such a young age.
This is my experience of Millennials. Given the opportunity and when bonded by trust, it’s respected and appreciated. They have inherited an extremely high cost of living, with incomes that barely meet their basic human needs along with a very uncertain future.
My rent was only 25% of my income.
When I rented my first flat I felt like such a grown up. I was 18 and it was a one bedroom in Bondi Beach, Sydney. It was 35 years ago, and I was working in the hospitality industry at the time. I made about $400 a week earning $10 an hour and my rent was $100 a week. That was 25% of my income. The same type of work today pays an appalling minimum wage of just under $19 an hour, yet the rent for the same apartment at Bondi Beach, on average, costs $600 a week. That’s around 80% of the income earned.
My generation, Gen X’s, have benefited from the property boom, myself included. We’ve benefited from negative gearing, enjoyed the high returns of capital gains and tapped into equity to further build our wealth.
It has been my experience that Millennials are responsible, appreciative, grateful for support and respectful of property.
These questions need answers and they need to be discussed in a forum that doesn’t think of Millennials as the ‘smashed avo’ generation. Over five years of renting to Millennials, it has been my experience that they are responsible, appreciative, grateful for the support and respectful of property. They care for the environment, their health and have a good social conscience. They also want a chance to live, work, experience life and have a future; just like us.
These values have been what has spurred me to build The Room Xchange. Our platform fits the tenets of Millennials. It’s about sharing resources that already exist – the spare bedroom. We’re building social cohesion, connecting people from different cultures and ages and creating a win-win in the housing market on both sides of the equation. Stressed out, time-poor households who are working extended hours to pay for high mortgages can share their spare bedroom with a guest who is willing to help out for two hours a day in Xchange for food and accommodation. It’s not the only solution, but we can certainly put a dent in the stress around housing considering there are over 7 million spare bedrooms in Australia alone.
Over the last five years, I’ve personally hosted six Millennials. It’s how The Room Xchange began. Every one of our guests has contributed to our lives in a real and profound way. In turn, we’ve been able to support them at various stages in their lives. Our platform has gone on to connect hosts with guests across Australia. The guests are a mix of university students, young adults leaving home for the first time or in between stages of life. Most are simply looking for affordable accommodation.
Imagine if the real estate industry looked at The Room Xchange as a rental apprenticeship, giving Millennials a hand-up into the rental market.
What I’d like to see is the real estate industry becoming part of the solution to housing affordability for Millennials as opposed to just saying ‘no’. What if a year of ‘Xchanging’ had the same value and reference as a year of renting? Imagine if the real estate industry looked at The Room Xchange as a rental apprenticeship. A way to show responsibility, consistency, and respect for someone else’s property. Aren’t they one and the same? In addition, a year of ‘Xchanging’ can not only build their reference base, but it will also increase their bank balance by saving them around $20,000 a year. Imagine the impact it could have on a young adults life.
Xchange – Rent – Buy.
Let’s take it a step further. What if ‘Xchanging’ was offered as a third option? Xchange – Rent – Buy. Imagine the benefits to all. Now, I’m not naive to believe that everyone wants to share their spare bedroom or Granny Flat, but I believe, that given the systemic problems that many, especially Millennials have in entering the market and the stress that property owners often have working long hours to cover their mortgages, it’s certainly something to think about.
I was recently asked by my current guest ‘Xchanger’, Andrew Butler, a 33-year-old with a Ph.D. in Astrophysics: “Why it is that shelter, one of the most basic of human needs, is so difficult to acquire?” It’s a great question.
As the mother of two Millennials, I’d like to help build a future where housing affordability for Millennials is a fundamental right of every human being; not a privilege.