Welcome to Thoughts on the Market. I'm Rich Hill, a managing director with Morgan Stanley's research team.

As part of our month-long series exploring the effects millennials and Gen Z will have on markets in the coming years.

I'll specifically take a look at what these two upcoming generations and their habits will mean to the housing market.

Rental affordability has been in the headlines recently given rent regulation in New York, California, and several

other states.

There is little doubt that rents are growing less affordable.

It's something that many renters across the country feel every day.

And while it's tempting to think that it is just an income

inequality problem, we think it's more complex and has a lot to do with where jobs are

being created. As millennials age, they begin to form more households, nearly double the rate over the next several years

versus the recent history.

And the National Apartment Association estimates that the U.S. will need 4.6 million new

apartments by 2030 to accommodate this demand.

We think it's not obvious where this demand will manifest itself given shifts in the U.S. population

migrations are real. People are broadly moving from the northeast and the

Rust Belt to the southeast, southwest, and the west. These rising

populations in combination with rising income tend to lead to accelerating rent

growth. But keep in mind, people are moving to these areas

because they have a combination of cheaper cost of living

and or greater job creation.

However, it's not only population migrations

that are influencing demand for apartments, but also demographic shifts.

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