Why has the rate of young adults going out on their own been trending downward?
Working paper examines decline in household formation
Following the Great Recession, many young individuals are choosing to live at home or move back in with their parents after previously living on their own. Boston Fed Senior Economists and Policy Advisors Daniel Cooper and María José Luengo-Prado sought to better understand why the share of young adults living independently has decreased. Such a decline can impact a number of factors for both the macroeconomy and the well-being of individuals themselves.
In their working paper, “Household Formation over Time: Evidence from Two Cohorts of Young Adults,” Cooper and Luengo-Prado examined two groups of young adults ages 23 to 33 from different time periods—one group from 1979 and another from 1997—in order to measure how the predictors of household formation have potentially shifted over time.
Not surprisingly, they found the share of individuals living with parents declines with age, but the share is noticeably higher at nearly every age for the more recent group than for the earlier group. Even though economic conditions were difficult at times for both groups, the more recent cohort is much more sensitive to these circumstances.
The authors indicate there are a few potential explanations for the increase in those living with parents. First, it has become more socially acceptable over time for young adults to live at home. Second, a shift in parenting style may also play a role—for example, children of controlling parents are less likely to live at home compared to children of more permissive parents. Additionally, family sizes have declined while homes have become bigger, making it more attractive to stay at home a bit longer. And finally, parents may have less capacity to provide financial support to help their children move out and live on their own.