Flickr/Guian Bolisay

They’re living in cities, but they’re also priced out of central areas.

Millennials are an important demographic group, and not just because we invented the selfie. In 2015, the generation surpassed Gen Xers as the biggest chunk of the U.S. workforce, and it’s projected to eclipse Baby Boomers as the largest generation of all-time, according to the Pew Research Center. The economic outlook, housing preferences, and employment patterns of young people play a huge role in shaping the future of U.S. cities.

Recently, Millennials have started to move back to cities, reversing the decades-old trend of suburbanization. But within the city, they’re not exactly making a beeline for downtown, according to new research released by the Urban Land Institute.  

Here’s how the ULI sums up the report’s findings, in a press release:

Contrary to popular belief, most Millennials are not living the high life in the downtowns of large cities, but rather are living in less centrally located but more affordable neighborhoods, making ends meet with jobs for which many feel overqualified, and living with parents or roommates to save money.

ULI surveyed 1,270 people age 19 to 36 in November 2014. The researchers found that while a large share (37 percent) of respondents identified as “city people,” and almost half of the respondents lived within central-city boundaries, only 13 percent actually stayed in or near the heart of the city’s downtown region. The rest live in quieter neighborhoods around the urban core.

Here’s a break-up of where millennials currently live, as per the ULI survey:

Urban Land Institute

The reason for this trend is that while Millennials greatly value walkability, mixed-use neighborhoods, public transportation, and retail and entertainment options, only some of them can afford expensive housing in central business districts. So they settle for neighborhoods outside bustling urban hotspots. Millennials living in Washington, D.C., for example, might choose to live in Shaw or Bloomingdale over the downtown Pennsylvania Avenue area.

It’s well-known that millennials have financial constraints. Roughly 29 percent of ULI respondents with full-time jobs earned less than $35,000 a year, and more than half made less than $50,000 (below, right). These economic realities require certain compromises. Living in a cheaper neighborhood is one; renting instead of buying is another. Half of the respondents rented (below, left), and they payed a median rent of $925. Two-thirds lived in cheaper, low-rise garden style houses instead of high-rise apartments with more amenities; and 27 percent of these renters had roommates to divvy up the costs.

But while they may not have the resources now, Millennials are super positive about the future. Nine in ten of them predicted that they’re going to be at the same or in a better financial position than their parents, and virtually all expected to become homeowners at some point.

“In general, Millennials are an intriguing combination of optimism and realism,” Leanne Lachman, one of the authors of the report, said in a press release. “They have high hopes for themselves in the long-term, despite having to temper their short-term expectations. They are proving adept at making the environment in which they currently live fit how they want to live, while not losing sight of how they see themselves living in the future.”

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