Urban Institute looks at future of homeownership in US. Correlation between household formation (headship rate) and homeownership.
According to the Urban Institute, all real estate professionals (agents, brokers, developers, investors, mortgage and banking lenders, architects, city planners, etc.) along with policymakers, thought leaders and change-makers need to be aware of and fully understand where homeownership currently is, where it’s going, who has benefitted and who has been left behind.
Here are some key findings of the research and analysis the Urban Institute has done around the future of homeownership in the US.
Household Growth to Slow Over Next Two Decades
Household growth has been trending down since 1990. From 1990-2010, household growth averaged some 12.4M per decade. Household growth between 2010 and 2020 came in at 7.3M.
The Urban Institute projects household growth to be 8.5M from 2020-2030 and 7.6M from 2030-2040.
Why is household growth declining? Population growth in the US is declining as are headship (head of household) rates for most age groups.
Net Household Growth To Be From Households of Color
The Urban Institute projects there will be 16.1M net new households between 2020-2040.
Hispanic households are projected to grow by 8.6M; Asian households are projected to grow by 4.8M; Black households are projected to grow by 3.4M; Caucasian households are projected to decline by 0.6M.
Nearly All Net Household Growth To Be from Senior Households
Among the 16.1M net new households from 2020 -2040, 13.8M will be headed by someone over 65 years of age.
Homeownership Rate To Continue Falling Among Every Age Group
The Urban Institute projects that the homeownership rate will fall from 65% in 2020 to 62% by 2040. Those 25 to 44 years old in 2010 will be the most affected due to the Great Financial Crisis that severely challenged their ability to become/remain homeowners.
The aging of the US population will cushion the drop in homeownership because older households, on the whole, have higher homeownership rates.
Decline in Homeownership Rate To Be Most Felt by Black Households Headed by 45-74 year olds
If current housing/lending policies remain the same, Black homeownership rates will fall well below those of previous generations of the same age. One result of Black homeownership decline would be unprecedented numbers of Black renters over 65…from the 1.3M in 2020 to 2.6M in 2040
Net Growth in Number of Homeowners from 2020 to 2040 to be People of Color, Especially Hispanic Homeowners
The Urban Institute projects 6.9M net new homeowner households between 2020-2040. Among those, Hispanic homeowners project to grow by 4.8M; other races but mostly Asian homeowners to grow by 2.7M; and Black homeowners to grow by 1.2M.
The total number of Caucasian homeowners is projected to decline by 1.8M.
Renter Growth to Twice Outpace Homeowner Growth from 2020-2040
The Urban Institute projects there will be 9.3M net new renter households between 2020-2040, and increase of +21%.
Hispanic renters are projected to grow by 3.8M; Black renters by 2.2M; other races including Asian renters by 2.1M; and Caucasian renters to 1.2M.
What Does All of This Mean?
The Urban Institute suggests the following policy/practice shifts to reflect its projected homeownership shifts:
- Urgently focus on developing and implementing policies, practices, equipment, design, etc. that address specific needs of senior households
- Prepare for surge in renters, increase the supply of affordable housing and adopt more flexible zoning and land use regulations
- Decrease enormous racial homeownership gap by
- Improving/expanding financial/homeownership education and preparation
- Increase access/types of down payment assistance programs
- Re-examine/re-vamp borrower qualifications and creditworthiness accessibility
Thanks to the Urban Institute.