How Driving Less and Renting More May Change Our Economy

Two Atlantic editors investigate why the younger generation is not only driving less but also less likely to purchase homes than their baby boomer parents. Is it temporary, a result of a bad economy, or are these behaviors a permanent shift?

Derek Thompson and Jordan Weissmann, senior and associate editors at The Atlantic, respectively, look at the reduced car-buying, driving, and housing choices of the Millennial generation, and speculate how it will affect the economy in the September, 2012 issue of The Atlantic Magazine.

The auto companies act as if "demand for cars within the Millennial generation is just waiting to be unlocked; that as the economy slowly recovers, today's young people will eventually want to buy cars as much as their parents and grandparents did."

Thompson and Weissmann agree that "the Great Recession is responsible for some of the decline. But it's highly possible that a perfect storm of economic and demographic factors-from high gas prices, to re-­urbanization, to stagnating wages, to new technologies enabling a different kind of consumption-has fundamentally changed the game for Millennials."

"When Zipcar was founded in 2000, the average price for a gallon of gasoline was $1.50, and iPhones didn't exist. Since then, it has become the world's largest car-sharing company. Zipcar owes much of its success to two facts. First, gas prices more than doubled, which made car-sharing alluring. Second, smartphones became ubiquitous, which made car-sharing easier."

Next, the editors look at the noticeable urban preferences of the Millennials that involve renting in cities rather than owning in suburbs. That could doom the economic recovery when one considers the importance of housing construction and auto manufacturing in our economy. But the editors offer an alternative outcome.

"Economic research shows that doubling a community's population density tends to increase productivity by anywhere between 6 percent and 28 percent. Ultimately, if the Millennial generation pushes our society toward more sharing and closer living, it may do more than simply change America's consumption culture; it may put America on firmer economic footing for decades to come."

Thanks to Andrew Boone

Full Story: The Cheapest Generation: Why Millennials aren’t buying cars or houses, and what that means for the economy

Comments

Comments

author's missing a few things.

just left this on the Atlantic's comments page...

OK, just took a quick scan through the comments and leaving aside the reality of the fact that young people are entering adulthood in the ashes of a massive financial crisis it doesn't look anyone's bother to point out that all things being equal construction in dense(r) urban areas, where Millenials increasingly want to be (along with everyone else apparently), is more expensive and generally more complex than on virgin fields of farmland. sure there's a lot of existing stock, but modernizing the old stuff is still pretty highly value added and probably has a much greater labor share of construction than your typical greenfield tract. On top of that construction unions usually have far more of the work in dense areas, meaning that the people who build the housing are far more likely to make a livable wage, have employer provided health care, and save something for their own retirement.

While there may be fewer cars purchased to get these folks around from here to there, they still need to get around. As awesome and versatile as bikes are, they don't work for everyone or in every situation. Despite what some fools in the comments say, transit is vital infrastructure (buses, trains, and everything you need to maintain and operate them) and puts a hell of a lot of people to work. And yes, the people who will build and operate these systems are far more likely to be union members who are paid decent wages and benefits.

My point is that the author has his construction and infrastructure economics upside down and doesn't realize that the densification of the American population is a good thing economically as well as in so many of the other ways that matter (socially, environmentally, politically). His point is well taken but if anything underscores the need to make sure that the transition into a denser America is done smartly.

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