America's Housing Assistance Lottery (Urban Institute)

The JCHS research team is busy these days, putting the finishing touches on the 2014 State of the Nation's Housing report, which will be released via live webcast on Thursday, June 26.  In the meantime, check out this great YouTube illustration, about the scarcity of housing assistance in the U.S., put together by our friend Erika Poethig at The Urban Institute: 

(If the video doesn't appear, watch it on YouTube.)

Pent-Up Demand for Additional Household Formation is Fraught with Uncertainties

by George Masnick
Fellow

In early 2011, economists at the National Association of Home Builders (NAHB) reported that the slowdown in household formation that started in 2007 with the advent of the Great Recession had produced a 2.1 million household formation shortfall by 2010. The authors concluded that the demand for new housing should accelerate dramatically once the economic recovery releases this “pent-up” demand. Another pent-up demand calculation, by Jed Kolko at Trulia, estimated 2.6 million “missing households” in 2010. After three additional years in which the economy has improved on many fronts – albeit at a slow pace – the 2013 Trulia deficit in the household count was still estimated at 2.4 million. But how solid are these estimates and how likely is it that household formation rates will return to pre-recession levels?

One difficulty in making these calculations is that actual household growth estimates since 2007 vary considerably from year to year and are inconsistent among data sets (Figure 1). There is good reason to believe that the most widely used data to track household growth, the Housing Vacancy Survey (HVS, used in the NAHB calculation), has seriously underestimated the number of US households – and as a result household growth – since a revision in methodology in 2003.  The HVS’s average annual estimate of household growth since 2007 of 550-600,000 contrasts with the American Community Survey’s (ACS) estimate of 700-800,000 new households annually and the higher Current Population Survey (CPS) growth numbers of over 1 million new households annually since 2010. Without agreement on actual levels of household growth since 2007, it is quite impossible to gauge the shortfall in growth, and therefore the probable level of pent-up demand. 

Notes: 2013 ACS not available.  2010-2013 growth for the ACS a two-year average of 2010-2011 and 2011-2012 data.

The method used to estimate the “normal” level of household growth also matters. The NAHB number was based on a simple difference between “actual” household growth estimates for the 2007-2010 period, and a straight line trending of HVS household growth prior to 2007. Over the very short run this approach may be appropriate, but would not be expected to hold up over a longer period.

Kolko’s calculations are more sophisticated. Using CPS data, he computes the change in age-specific headship rates (the share of persons in an age group that head an independent household) from the average 2000-07 pre-recession levels. This change, when multiplied by the official annual population estimates for each year, gives the deficit in number of household formations in each age group due to changes in the propensity to form households. This method corrects for the effects on household formation of simple changes in the size and age structure of the adult population, which the NAHB method does not take into account. But what Kolko’s calculation does not control for is the increasing share of minorities in the population. And since Hispanics and Asians have lower headship rates than non-Hispanic whites this oversight is not trivial (Figure 2). In fact, a certain amount of the decline in household formation is due to the changing race/Hispanic origin composition of the population and not to the recent economic downturn.

This issue is exacerbated by an undercounting of growth in Hispanics and Asians over the past decade, as revealed by the results of the 2010 Census. The underestimating of Hispanic and Asian shares of the population in the CPS during the 2000s also means that pre-2010 CPS headship values are biased upward by overcounting the white share, due to incorrect population weights in the CPS survey, making the 2000-2007 benchmark headship rates too high, and exaggerating the decline in age-specific headship pre-versus-post recession.  

Even controlling for both age and race/Hispanic origin in the different surveys, we know that household formations have slowed relative to pre-recession levels, we just do not know by how much given concerns just discussed. We also know that the slowdown is likely a consequence of the recession. But, we are uncertain about whether the reduced level of household formation has been primarily driven by economic factors, or whether it is the result of more fundamental changes in attitudes and behavior regarding independent living by today’s young adults that might be partly recession-driven, but may also have deeper roots.

Lower rates of labor force participation, lower incomes of those in the labor force, rising rents, greater student loan debt and tight mortgage lending conditions are economic factors that could partly explain low levels of independent household formation. But we do not know whether these effects are likely to be short-term or long-term as an improving economy and governmental initiatives could reverse many of these factors quite quickly. 

But trends in college and graduate school enrollment, the structure of the labor force, the timing of marriage and childbearing, and attitudes about co-residence might lead millennials to form independent households according to a different timetable than the generations that preceded them, regardless of economic conditions. Going back to school for retraining is becoming increasingly necessary for technology oriented jobs in a rapidly changing economy. Employment in start-ups, freelance work, and spells of temporarily working long hours in different jobs and on various projects, followed by periods of downtime, are increasingly common. The timing and sequence of important life-course decisions such as co-habitation, marriage, and childbearing have become more fluid. Intergenerational interdependency at various life-course stages has also changed, with parents playing a larger role in financially supporting their children as young adults, in helping to raise grandchildren, and in opening their homes for spells of co-residence when their children ask. These factors may have inertia that will make them less responsive to economic changes.  

Source: Joint Center tabulations of CPS data.  Average of 2011, 2012 and 2013 values.

And even if market forces are the primary reasons for depressed rates of household formation, geographic variations in job and income growth and housing costs and availability mean that the magnitude and pace with which pent-up household formation is released should vary in different parts of the country. For all these reasons calculations about the extent of pent-up demand for housing and speculation about its causes, when demand will be released, and what kind of housing will be required to meet future demand are fraught with uncertainties. The latest Joint Center household projections hold household formation rates constant at average 2011-2013 levels, making no allowance for the future release of pent-up demand, and should therefore be considered conservative.   

The Active Process of Aging in Place

by Jen Molinsky
Research Associate

America’s older population is poised for unprecedented growth. The youngest members of the baby boom population, born 1946-1964, have turned 50, while the oldest boomers have crossed the 65 threshold. Growth among 65-74 year olds is set to soar, climbing from 22 million in 2010 to an estimated 39 million by 2030, a 78 percent jump. By 2040, there will be an estimated 30 million 75-84 year olds, and another 14 million people 85 or over.

The vast majority of older adults currently live independently. This is true even among the oldest group: of those aged 85 and above, 72 percent live by themselves or with a spouse/partner in their own homes, according to the 2012 American Community Survey. With evidence that Americans of all ages are moving less, and given health care improvements that have delayed moves to institutional care, the trend toward independent living in older age is very likely to continue.

Indeed, surveys show that most people want to live independently in their current homes and communities as they age—a preference popularly called “aging in place.” In a 2010 survey of 1,600 people over aged 45, AARP found that 86 percent somewhat or strongly agreed with the statement “What I’d really like to do is stay in my current residence for as long as possible,” while 85 percent somewhat or strongly agreed “What I’d really like to do is remain in my local community for as long as possible.” A 2014 online poll by the American Planning Association found that 69 percent of 50-65 year old respondents with at least two years of college reported that staying in their homes as they got older was somewhat, very, or extremely important.

The Center for Disease Control defines aging in place as “the ability to live in one’s own home and community safely, independently, and comfortably, regardless of age, income, or ability level.” The CDC’s focus on aging in place as an “ability” is on point: because abilities may change over time, the definition hints at the dynamic nature of aging in place, rather than the absence of action and change regarding one’s living environment. The reality is that, for many, aging in place is a deliberate and dynamic process, one best undertaken with preparation including adaptations of physical space, modes of transportation, or other facets of life in advance of physical or cognitive need to do so. For some, it may even involve moving in order to set the stage to live independently for as long as possible, relocating to a new home that is more comfortable, safe, affordable, and/or convenient. Moves may be within the current community – preserving existing social connections – or outside to locations where changing needs can be better accommodated either because of more community resources or proximity to family.

And even with preparation, aging in place is an ongoing process (as literature from the field of gerontology recognizes) in which older residents renegotiate how, and indeed if, they continue to stay in their current home as their preferences and circumstances (health, finances, relationships and family and social supports) shift over time.

The CDC mentions the ability to remain in one’s community as well, and indeed a critical part of aging in place is the setting in which it occurs. Many researchers, advocates, and commentators point to the same list of elements needed to make communities more livable for all ages, including older adults: affordable, secure, and physically accessible housing; and affordable, safe, and reliable transportation alternatives for those who are unable or choose not to drive (such as mass transit, paratransit, and safe and desirable walking routes to services and amenities). Opportunities for older residents to engage with their communities in recreational, learning, cultural, volunteering, and/or social experiences, and options for in-home health care and/or assistance with activities of daily life as circumstances change are also critical.

Yet there are tremendous challenges in ensuring that our houses and communities are ready to support a high quality of life for older adults aging in place now, and the growing numbers of those who will do so in the future. Needs include more accessible housing units for those with ambulatory difficulties; a larger range of housing options for those seeking smaller, more affordable units; improved infrastructure to promote pedestrian safety; transportation alternatives to private cars;  and local services to assist older adults with home maintenance, care, and meals. The federal government has a role too, in providing financing options to help homeowners and renters modify their homes to improve safety and accessibility, supporting the growing number of low-income senior renters, and in improving collaboration between health and housing programs to ensure they are mutually supportive of aging in place.

There is much to be done to provide the needed supports for today’s older population and the coming waves of older adults engaged in the dynamic process of aging in place. A first step is for individuals to recognize the value of planning in anticipation of future needs, and for government at all levels to recognize the magnitude and importance of the challenges and opportunities associated with an aging population seeking to age in their communities. The next step is to take stock of what we already know about the best way to support aging in place and to consider how the public, nonprofit, and private sectors can innovate and bring solutions to scale. 

To help spur and inform this important discussion, the Joint Center for Housing Studies and the AARP Foundation will release a comprehensive report on this topic this fall. Housing America's Older Adults: Meeting the Needs of an Aging Population will be released at an event in Washington, DC on September 2, 2014.  Join our mailing list to receive more information this summer.

Watch our Gateway Cities Summit on YouTube

If you missed our recent event at Harvard Graduate School of Design, Opening the Gates of Opportunity: Realizing the Potential of Gateway Cities in Massachusetts, you can now watch the full event on YouTube.

Gateway Cities are midsize urban centers in Massachusetts facing stubborn social and economic challenges, but with many assets that have unrealized potential. Our half-day event brought together community leaders, public officials, policymakers, faculty and students (agenda) to exchange ideas and information about workable solutions for these cities and local economies. Through these discussions, we captured innovative, cross-sector, collaborative ideas and models that we hope will feed into the work that is being done by students and faculty in urban planning.

We want to thank all of the speakers, panelists, students, and sponsors who made our event such a success.

The video is available in three sections:

Part 1:  Welcome & Keynote
Part 2:  Goals, Challenges, and Who Are We Trying to Help?
Part 3:  How Do We Get it Done? Tough Choices, Which Places, and Why?

Download the Agenda from the event