The housing market is witnessing a shift in preferences among Millennial and Gen Z home buyers, with a growing interest in the practice of “house hacking” – renting out part or all of a home for additional income. This trend is highlighted in Zillow’s 2023 Consumer Housing Trends Report, which reveals key insights into the motivations and demographic variations among those considering this unconventional approach to homeownership.

Younger home buyers, often facing relatively more challenges in affording down payments and mortgages, are at the forefront of the house hacking trend. Zillow data indicates that more than half of Millennial and Gen Z buyers view the opportunity to rent out a portion of their home for rental income as “very” or “extremely” important. That’s compared to 39% of all homebuyers, which is up eight percentage points in the past two years. 

Additionally, the importance of the opportunity to rent an entire home in the future to produce rental income is highest among Millennials (55%) and Gen Z (51%) buyers, followed by Gen X (36%), and Boomers + Silent Gen (4%). This contrasts with the 43% of all successful buyers, reflecting a notable nine-percentage-point surge from 2021.

Prospective buyers –household decision makers 18 years of age or older who intend to buy a home in the next year — especially Gen Z and Millennials, also place a higher importance on the opportunity to rent out the entire home in the future to produce rental income. Millennials lead with 64%, followed by Gen Z (56%), Gen X (51%), and Boomers + Silent Gen (23%). This indicates this trend could grow. 

Impact on Affordability Crisis

The findings point to how the affordability crisis disproportionately affects households of color.  Latinx homebuyers prioritize the potential for rental income at a higher rate than other racial groups.  Among Latinx buyers, 51% expressed interest in renting a portion of the home for additional income while residing in it, followed by 46% of Black buyers and 40% of white buyers.

The rising interest in house hacking reflects a pragmatic response to the financial challenges of homeownership, particularly among younger generations. The variations across racial and generational lines underscore the need for tailored solutions to address the evolving landscape of housing preferences and financial strategies. As house hacking gains momentum, it becomes imperative for policymakers and real estate professionals to adapt to these shifting trends and provide support for diverse pathways to homeownership.