Houses for young adults: challenges and opportunities
8 November 2023 - Insights

Houses for young adults: challenges and opportunities

Job insecurity, the high cost of living, and challenges in securing loans make homeownership or renting a daunting task for many young people, putting their dreams of independence on the line. Yet, with the advent of new housing models and available incentives, opportunities arise for those in search of their own space.

According to a Eurostat study, on average Italians remain in their parents' home until after turning 30, placing them among the latest in Europe to leave the family household. However, this is not a "mama's boy" issue, as the stereotype might suggest, but a complex socio-economic reality. However, this is not a "mama's boy" issue, as the stereotype might suggest, but a complex socio-economic reality.

The volatility of the job market, the lack of economic stability, and salaries that often don’t aligned with the cost of living all directly affect the ability of young people to "spread their wings" by buying or renting a home Additionally, the rise in inflation further complicates the challenging transition of young Italians toward housing independence.

Challenges for young adults looking for a home

The unfavorable economic situation has deeply affected the real estate market, making it increasingly challenging for younger generations to afford a home. It's not just the soaring prices; the complexities of the buying and renting processes add an extra layer of difficulty when searching for the ideal home.

For instance, the lack of a well-established credit history and the prevalent job instability, both quite common among the younger population, make access to credit far from simple. E pernAnd even for those fortunate enough to secure a mortgage, the financial commitment can be overwhelming. This is particularly true as the European Central Bank (ECB) has changed its stance, steadily increasing interest rates quarter after quarter, following years of historically low rates.

The situation isn't much better for those who opt to rent. In today's residential rental market, there seems to be a perpetual shortage of available properties. This problem has intensified over the years, as short-term rentals—often viewed as safer and more lucrative—dominate the market, thereby reducing the availability of traditional rental options. And with such high demand, rental prices have soared, often exceeding what the average young worker can afford.

First home incentives for young adults

To foster housing independence among young people, the government has launched various initiatives, including subsidies, tax incentives, and support schemes that simplify entry into the residential market. One of the key programs is the "First Home Bonus for Under 36." With this initiative, young individuals with an Equivalent Economic Situation Indicator (ISEE) of no more than 40,000 euros annually can avail of tax advantages when purchasing their first home, provided the home's value doesn't exceed 250,000 euros. Specifically, the bonus entails a complete exemption from registration, mortgage, and cadastral taxes, a 50% reduction in notary fees, and, for purchases subject to VAT, the recognition of a tax credit equivalent to the VAT paid to the seller. Currently, this bonus is applicable to deeds signed between May 26, 2021 and December 31, 2023.

In terms of accessing credit, the government has established a “First Home Loan Guarantee Fund” allowing young couples and individuals under 36, with an annual ISEE of less than 40,000 euros to apply for mortgages up to 250,000 euros. The government guarantees up to 80% of the loan amount, provided the applicant does not own other residential properties, even abroad. This measure is currently in place until December 31, 2023.

There's also a "Rent Bonus" available for young individuals aged 20 to 31 who rent a property or part of it for use as their primary residence. This bonus allows a 20% deduction of the rent (up to a maximum of 2,000 euros) for the first 4 years of the lease agreement. To qualify for this benefit, it's essential that one's annual total income must not exceed 15,493.71 euros.

New housing models

The modern real estate market poses a series of challenges for young adults, but it also conceals opportunities that may not be immediately apparent, redefining the conventional notion of property ownership.

Let’s consider, for instance, co-housing, a concept originating from Nordic countries that centers around the principle of sharing. While still in its early stages, it is carving out a niche in the residential market, offering a more sustainable approach to property ownership by splitting costs among several individuals. This approach also fosters a strong sense of community, something that resonates strongly with the new generations.

Another option worth exploring is purchasing a house with a buyback option agreement. Under this arrangement, the seller retains the option to repurchase the property within a predetermined period, which is legally capped at five years. If the seller exercises this option, the buyer is reimbursed for the house's purchase price, along with any incurred expenses. These homes are often available at reduced prices, though they do come with an element of uncertainty. Therefore, this approach proves particularly advantageous for those seeking flexibility in their real estate investments.

Lastly, rent-to-buy schemes provide an alternative to immediate property purchase, making it an ideal option for individuals who lack the funds for a down payment or do not meet mortgage requirements. These schemes allow tenants to occupy the house with the subsequent option (but no obligation) to purchase it within a specified period. A portion or the entire amount of the rent previously paid will be deducted from the purchase price.