Out of the Basement and Living Independently: The Impacts of Future Income and Student Loan Debt on the Housing Choices of Young Adults

Abstract

Despite the recent focus on the housing choices of young adults, attention has been separated into that for continued or return to staying with parents and that for homeownership of young adults. In light of this, to pursue a more holistic understanding, this paper classifes the housing choices of young adults into three ordered categories: dependent living, independent-rent, and independentown. Subsequently, the study explores the potential impacts of future income and student loan debt on the housing choices of young adults. In doing so, I create two measures of expected sum of future income (ESFI) and employ ordered probit model with instrumental variables to account for the ordered, discrete nature of the housing choices variable while controlling for issues such as endogeneity and measurement errors. I nd that neither future income nor student loan debt have statistical significance in relation to housing choices for the younger population (ages 25 to 29) of young adults. On other hand, there are both statistical significance and sizable magnitude for the said variables' impacts in relation to housing choices for the older population (ages 30 to 34) of young adults.