Young adults are living with their parents in greater numbers than the prior generation, according to a study completed by the Federal Reserve Bank of Boston. An average of 33.1 percent of respondents to the study in the 1979 generation were living with parents (shortened in the report to “LWP”) compared with 36.7 percent of respondents in the 1997 generation—a difference of 3.6 percentage points.
Not starting an independent household can have implications for the health of the economy.
The Fed cites housing costs and business-cycle conditions, which explain up to 70 percent of the difference in household-formation rates. Shifting attitudes toward living with parents also play a role.
The authors of the report, Daniel Cooper and Marie Luengo-Prado, found that the percentage of those living with their parents share is noticeably higher at nearly every age for the 1997 generation (called a “cohort” in the report) compared with the 1979 generation.
Social factors play a role as well as economics. The study notes that “we find that even though economic conditions were difficult at times for members of both cohorts, whether or not individuals are living with parents (LWP) in the 1997 cohort is much more sensitive to economic conditions than in the 1979 cohort. We conjecture therefore that attitudes toward LWP have become more favorable over time. The survey shows both increasing attachment over time of individuals to the …place where they grew up and more favorable views of “older people sharing a home with grown children.”
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Race and ethnicity also is a factor. There have been shifts by race in the share of respondents LWP over time. In the 1997 cohort, non-black/non-Hispanic and Hispanic youths, regardless of age, were more likely to be LWP than their 1979 counterparts, while the rate of LWP for blacks was unchanged. In addition, the differences across cohorts in the share of respondents LWP by race are economically meaningful. For example, a Hispanic youth in 1997 is roughly 20 percentage points more likely to be LWP than a non-black/non-Hispanic youth in 1979. Overall, these results show that there is important variation in household formation by race both within a given cohort and over time—a result that suggests it is important to consider demographic shifts in the racial composition of the U.S. population when thinking about future patterns of LWP and/or household formation.
Geography also is relevant. A The disproportionate percentage of LWP respondents is especially true in California, the Northeast, and the mid-Atlantic areas, where higher housing costs and other factors in recent years have likely made it more difficult for young adults to live independently than in the 1980s. The research also reveals an increasing level of attachment over time to the geographic area in which individuals are raised.
The study concludes: “We further show that an individual’s race noticeably impacts the likelihood of LWP— both within cohorts and especially over time. These results could be driven by cultural differences, proxied by race, in attitudes toward young adults who are LWP. For example, within certain communities, the choice of a young adult to live at home after finishing high school or college may be widely acceptable, whereas in other communities this preference may be viewed less favorably. Still, while acknowledging that the racial composition of the U.S. population appears to be important for accurately predicting household formation rates going forward, population demographics are slow to change. Hence, it is unlikely that a shifting racial mix in the United States can account for the sizeable decline observed in aggregate household-formation rates starting around 2006.
“The sheer magnitude of the employment losses during the Great Recession coupled with high housing costs can explain most of the decline in household formation, but even after controlling for local economic conditions, we cannot fully account for the…difference in individuals’ likelihood of living independently from their parents. To a certain degree, young adults seem inherently more likely to live with parents now than in the past, potentially due to shifting attitudes toward such co-habitation. We provide some evidence that this may be the case… Potential explanations for this shift in outlook include smaller family sizes and larger homes over time, which make it easier for young adults to cohabit comfortably with their parents.”