A 'for sale' on a housing development in Montreal in 2024. A new study has found that people take more risks with their finances when they feel priced out of the housing market.Christinne Muschi/The Canadian Press
When people decide they’ll never own a home, they start spending more, working less, and taking bigger financial risks.
That is the central finding of a new U.S. working paper on housing affordability, and it helps explain why today’s housing crisis is not just about housing. Once homeownership feels permanently out of reach, the authors argue that people do not simply adjust their housing plans – they change how they live. For the worse.
Over time, the study found, these changes compound and widen inequality while also dragging down economic effort. Housing affordability, in other words, is pushing a growing share of people to give up on long-term financial goals altogether.
They planned to downsize in retirement. Then their kids moved back home
It appears to be a global phenomenon. The paper notes that 46 per cent of Generation Z in the United States agreed with the statement, “No matter how hard I work, I will never be able to afford a home I really love.”
There is a movement in China referred to as tangping (“lying flat”), which suggests that the response to the idea that hard work no longer gives one a shot to thrive in life is to simply replace ambition with working and consuming as little as possible.
South Korea has a version of this phenomenon called sampo, which refers to a generation who has given up on three things: dating, marriage, and having kids.
A 2024 Ipsos poll revealed that 80 per cent of Canadians surveyed agreed that owning a home was only for the rich. That figure was highest for Generation Z at 90 per cent, followed by millennials at 82 per cent.
For all Canadians surveyed who did not own a home already, 72 per cent said they have given up on the idea outright.
The paper identifies three distinct groups emerging from the same housing market looking at U.S. data. First are renters who retain hope. They still believe homeownership is achievable. They cut spending, work harder, and avoid financial risks that could derail their progress.
Second are renters who give up. In the model developed by the authors, roughly 15 per cent of the cohort born in the 1990s has already crossed that psychological threshold by age 30, and nearly all remain there for life. Third are those who do become homeowners.
What happens after the split is where the research becomes unsettling.
Among renters who give up, three behavioural problems consistently appear. Consumption rises relative to wealth, which translates into less savings. Work effort declines, often seen in lower motivation and discretionary effort. And risk-taking increases.
This includes greater participation in high-volatility investments. The authors describe this as a “gambling for redemption” motive: if steady saving will never close the gap, long-shot strategies start to feel like rational options.
The paper also documents a striking threshold effect. When housing affordability worsens locally, behaviour diverges sharply. Renters close to buying tighten their belts, cutting spending and leisure while doubling down on work. Renters far from buying do the opposite. Spending rises. Leisure increases. Effort falls. The same affordability shock produces opposite reactions depending on whether people believe they are still in the game.
This is where the usual buy-versus-rent debate misses something important.
We often describe mortgages as forced savings. That is true but it’s an incomplete picture. A mortgage is also forced financial optimization.
Once someone buys a home, spending, labour effort, and investment decisions are more likely to snap into long-term focused, financial planning mode. Cash flow is precommitted. Extra work has a clear payoff. Risk tolerance shrinks because losses now threaten something tangible. Time horizons lengthen.
Homeownership does not just encourage saving. It gets people standing up, financially, as opposed to lying flat.
An economy cannot thrive when a growing share of its population stops believing effort pays off. Housing affordability is not just about shelter or wealth accumulation. It is about whether the financial life cycle still works at all.
Preet Banerjee is the creator of YourMoneyDegree.com, a financial literacy program with an AI companion app.
