Wednesday, January 27, 2016

Article review- “Patriarchy, Power, and Pay: The Transformation of American Families, 1800-2015”

George Masnick
Senior Research Fellow
At my age, there is little that makes my jaw drop, especially while reading an article in one of my professional journals. However, this is exactly what happened when “Patriarchy, Power, and Pay: The Transformation of American Families, 1800-2015” by Steven Ruggles appeared in the latest issue of Demography. (Another almost identical version of this paper is available free of charge here.) What struck me as amazing is the way Ruggles provides a long-term perspective on many of the demographic and economic trends taking place today that I have studied using a much shorter time frame. And by long-term, we are talking 150-200 years!

The Joint Center for Housing Studies' early effort to describe changes in household structure and the labor force participation of American womenThe Nation's Families, 1960-1990– adopted a temporal perspective from 1960-1990. Published in 1980, we thought at the time that a three-decade perspective was all that was needed to understand the dramatic changes of that era. Wrong! The longer historical perspective sheds much more light on the origins of today’s demographic shifts, particularly in household structure, and what they might mean for housing.

Ruggles begins with the trend in the share of persons age 65+ who live in multi-generational families. We have noted the increase in this household type during the past two decades, primarily due to the increasing share of Hispanic and Asian immigrants for whom multi-generational residence is more common, and have speculated about its implications for housing consumption. But since we housing researchers rarely look at trends spanning more than 30 or 40 years, we have no sense of whether the upward trend in multi-generational living is indeed all that significant.

Ruggles’ Figure 1, reproduced below, shows how slight the recent turnaround has been relative to longer-term historical levels. The high share of the labor force based in an agricultural economy drove the very high historical incidence of older Americans living in multi-generational households. Three quarters of the labor force in 1800 worked in agriculture, and farm labor still was in the majority in 1850 when the share of 65+ living in multi-generational families was also 75 percent. Ruggles explains convincingly why an agricultural based economy tied the generations together, and why the rise of wage labor off the farm split them apart.

Ruggles’ main theme is that the decline of what he calls the “corporate family” – those working in agriculture and other (often related) family businesses – and the gradual transformation of the workforce to include first only male breadwinners, and later dual earner and female breadwinner households – had the effect of making household structures both simpler and more fluid. Once again, his long-term perspective is enlightening in looking at the recent trend in such things as delayed marriage and divorce. Age at first marriage for both men and women has been rising steadily since 1960, and he predicts that the share of never-married 40-44 year old women will almost double in the near future, rising from 15 percent in 2010 to about 28 percent in 2030. Similarly, the rate at which married women are divorcing has increased steadily since 1960, showing no sign of this trend slowing. Consequently, the share of all households without a married couple present – which held near 20 percent between 1850 and 1950 – has risen to over 50 percent in 2010, and continues its upward trajectory.

Nor is it simply the case that young adults are just trading marriage for cohabitation. To be sure, this is happening to some degree, but Ruggles notes that the share of 25-29 year olds without a co-residing partner has grown from 23 percent in 1970 to 48 percent in 2007 to 54 percent today. The fastest growing household type is single-person rather than cohabiting couples, as more and more adults of all ages who never married, are separated/divorced, and are widowed live alone.

If the household is the unit of both production and consumption, greater fragmentation and instability in household structures is troublesome. The primary household production good today is the next generation, and the U.S. appears to be following the lead of many European countries in developing fertility levels below replacement. Nothing that Ruggles presents in his paper provides comfort that the recent declining fertility rates are simply due to the lingering effects of the Great Recession and will likely reverse themselves.

One contributing factor to declining fertility may be trends in income. Households have always provided the mechanism for combining incomes. To Ruggles’ dismay, the evolving global economy is leaving more American households without secure incomes. The long slide in the relative earning power of young men over the past 40 years has been mitigated by the steady rise in employment of wives. But now that fewer and fewer households contain a married couple, and given that women’s real wages have also begun to decline, aggregate household incomes for married couples has begun to decline as well. Ruggles suggests that the largest source of decline in economic opportunity for young people, especially over the past two decades and in future decades, may be the automation of both manufacturing and services made possible by new technologies.

Housing consumption broadly should follow the downward trends in employment and income. Boosting household formation and homeownership rates, especially among the young, will require a reversal of many of the long-term demographic and economic trends that Ruggles discusses.

Ruggles’ article has sixteen figures, some only going back in time to 1940, but many spanning 150 or more years. I highly recommend you take a look. Some will surely make your jaw drop too.

Thursday, January 21, 2016

Home Remodeling Activity Looking to Gain Steam Through Mid-Year

Abbe Will
Research Analyst
Expenditures for home improvements should see healthy gains in 2016, according to the Leading Indicator of Remodeling Activity (LIRA) released today by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The LIRA projects annual spending growth for home improvements will accelerate from 4.3% in the first quarter of 2016 to 7.6% in the third quarter. By then, the level of annual spending in nominal terms is anticipated to surpass the previous peak set in 2006.

2016 is looking to be a stronger year for home renovation activity compared to 2015 thanks to the continued recovery in the owner-occupied housing market. In most markets across the country, rising house prices are bringing more homes to the market and increasing sales, which is a large driver of home improvement activity.

The remodeling market has steadily improved in recent years with homeowners incorporating larger, more discretionary projects into their home improvement priorities. The real test this year will be whether the industry can clear ongoing bottlenecks in labor availability and consumer financing concerns to fully meet this increased demand.  (Click chart to enlarge.)

Notes: (e) – estimated; (p) – projected.  Historical data through the third quarter 2015 reflect significant revisions released by the US Census Bureau on 1-4-16. For more information, see: The fourth quarter 2015 is calculated using preliminary Census Bureau data and LIRA projections.
Source: Joint Center for Housing Studies of Harvard University. 

For more information about the LIRA, including how it is calculated, please visit the Joint Center for Housing Studies website.

Tuesday, January 19, 2016

Energy Consumption in the Residential Rental Sector, and Promoting Energy Efficiency

Elizabeth La Jeunesse
Research Analyst
With the recent release of our America’s Rental Housing report, as well as the landmark international agreement on climate change reached in Paris, we took the opportunity to revisit the question of how much energy is consumed by the residential rental sector, as well as to explore pathways to reducing energy usage by renter households. We will revisit this topic again with the release of the US Energy Information Administration (EIA)’s 2015 Residential Energy Consumption Survey (RECS). Meanwhile, here are a few facts about renters' energy usage, as well as ways renters' energy consumption can be reduced even further.

The residential housing sector has a sizable carbon foot­print, accounting for about 22 percent of national energy consumption and a similar share of energy-related domestic CO2 emis­sions (source: EIA website.). While the rental sector’s contribution to these emissions is smaller than the homeownership sector both in aggregate and on a per household basis, it nonetheless represents a sizeable share of residential energy consumption. According to results from the most recent Residential Energy Consumption Survey in 2009, renters were responsible for nearly a quarter of all residential energy use. On a per-household basis, renters living in single-family homes consumed 19 percent less energy than owner-occupants, while renters living in multifamily units consumed 29 per­cent less energy than owner-occupants. This lower energy use among renters reflects in part the smaller average size of rentals relative to owned units. However, while the 2015 RECS is not yet available, the updated data is likely to show higher ener­gy use by the rental sector because of increases in both the rentership rate and the share of single-family rentals.

The construction of new, more energy efficient units and loss or replacement of older units contribute to improvements in the energy efficiency of the rental stock over time. Based on our analysis of data from the 2009 RECS survey, we found that rentals built in the 2000s consumed 28 percent less energy on average than those built before 1980. Figure 1 below illustrates this trend, showing that newer single-family and multifamily rental units consume less energy compared to remaining, older units.

Figure 1
Note: Single-family excludes mobile homes.
Source: JCHS tabulations of US Energy Information Administration, 2009 Residential Energy Consumption Survey

However retrofits to existing units, especially those affecting the building envelope, windows/doors, appliances, and HVAC systems, also play an important role—and have more immediate impacts. As of 2009 the typical unit built before 1970 used nearly 25 percent less energy than same-age rentals in 1980. This substantial reduction in energy usage over time highlights the critical importance of retrofits to existing units for improving energy efficiency.

Figure 2
Note: Includes all structure types. Square footage includes all attached garages, all basements, and finished/heated/cooled attics.
Source: JCHS tabulations of US Energy Information Administration, 1980 and 2009 Residential Energy Consumption Surveys.

A variety of government and private initiatives currently target reductions in energy use in the rental housing sector. In particular, state and local building codes for energy efficiency provide a primary source of new regulations. These are influenced by changes in the International Energy Conservation Code (IECC), which continues to set higher standards for energy efficiency requirements in the building envelope, lighting, heating, and cooling. Federal appliance standards for equipment in residential/multifamily buildings are also tightening. Since 2009, fully 34 new or updated standards have been issued for products, estimated to cover 90 percent of residential energy use (source: US Dept. of Energy). Federal, state and local financial incentives, including tax deductions and credits, utility rebates and loan programs, also target reduced energy usage in rental properties.

In his research brief, "Reducing Energy Costs in Rental Housing," JCHS Senior Research Fellow  Michael Carliner highlights the pros and cons of these and other initiatives to reduce energy usage among renters. One emerging approach that bears particular promise is that of increasing access to energy usage information and related property performance data among renters and property owners. The idea is that greater transparency of energy cost information can incentivize renters and landlords alike to manage their energy consumption choices more efficiently, and to undertake cost-effective, energy saving investments. Energy usage data can even be ‘gamefied’ such that people voluntarily compete in the common effort to save energy—with real energy savings as a result (see ACEEE paper). For some examples of city-wide efforts to increase disclosure access to energy usage data, see Amy Morsh’s recent blog post at the Center for Climate and Energy Solutions.

While increasing access to information can help overcome market inefficiencies, major complications and trade-offs still remain in the quest to reduce renters’ energy consumption. With rental affordability challenges high and rising nationwide, one major question is whether property owners are passing the costs of energy-saving retrofits on to tenants. Structural feasibility is also a potential concern, since new appliance standards are not always compatible with what existing multifamily buildings can structurally accommodate in terms of HVAC sizing. Lastly, as discussed in the America’s Rental Housing report, efforts to improve the energy efficiency of the rental stock must also consider the location of rental housing units, which influences tenants’ travel options and transportation-related energy usage.

As the preceding discussion suggests, reducing renters' energy usage is a complex task with many possible ways forward, but also with many potential challenges and trade-offs. Ongoing and future efforts to improve the energy efficiency of the US rental stock ideally will take these complex factors into account, while balancing other critical policy objectives including rental housing affordability.

Tuesday, January 12, 2016

Surge in New Rental Construction Fails to Meet Need for Low-Cost Housing

Irene Lew
Research Assistant
As we highlighted in our recent America’s Rental Housing report, the housing affordability crisis has shown little signs of abating in recent years, as renter incomes continue to lag behind rising housing costs. Though there has been a ramp-up in rental housing construction, much of this new housing is intended for renters at the upper end of the income spectrum (Figure 1). Indeed, in 2013, four in ten new rentals charged monthly rent of at least $1,000, compared to less than a quarter of rentals built during the heavy volume of multifamily construction in the 1960s and 1970s, which was largely supported by federal subsidies. In addition, the median asking rent for new market-rate apartments has been rising in recent years, reaching $1,372 in 2014, up by more than a quarter from 2012.
Note: Data includes vacant for-rent units and those that are rented but not yet occupied. Excludes no-cash rentals and other rentals where rent is not paid monthly. 
Source: JCHS tabulations of US Department of Housing and Urban Development, 2013 American Housing Survey.  

New construction is providing relatively fewer rentals that are affordable to those with lower incomes. According to the American Housing Survey, new construction increased the total number of units renting for $800 and over by 14 percent between 2003 and 2013—roughly triple the gain in the number of units renting for under $400. In fact, just 34 percent of rental housing built between 2003 and 2013 rented for under $800 in 2013.

Indeed, there is a mismatch between the type of rental housing built over the past decade and the needs of growing numbers of lower-income renters. Between 2003 and 2013, the number of low-income renter households who could only afford units renting for under $400 (at the 30 percent of income threshold) increased by 40 percent but the number of rental units affordable to these households rose just 10 percent on net. Most of this 10 percent increase came from the downward filtering of higher-cost units to lower rents, rather than the construction of new lower-cost units.

Rental housing built during the last decade is increasingly out of reach for many renters. This is true across the metropolitan region. In central cities, nearly half (48 percent) of new units rented for at least $1,000 a month in 2013, in contrast to just 28 percent of rentals built before 2003. On the other hand, while rentals in non-metro areas tend to include a higher share of the lowest-cost housing (units renting for under $400) relative to those in metro areas, new rentals built in these locations are much less likely than older rentals to charge rents this low (Figure 2). For example, only 11 percent of single-family rentals built in non-metro areas before 2003 rented for $1,000 or over in 2013 but this share rises to 53 percent of single-family rentals built in 2003 or later.
Note: Data includes vacant for-rent units and those that are rented but not yet occupied. Excludes no-cash rentals and other rentals where rent is not paid monthly. 
Source: JCHS tabulations of US Department of Housing and Urban Development, 2013 American Housing Survey.  

New construction has also tilted toward larger buildings. At least eight out of 10 apartments (84 percent) completed for rent in 2014 were located in properties with 20 or more units. This is well above the average share—62 percent—of new rental additions in the previous decade (between 1999 and 2009). With developers prioritizing the construction of units in large multifamily buildings, the addition of units in smaller buildings with 2–4 apartments has slowed significantly. Apartments in structures with 2–4 units fell from 20 percent of multifamily completions in the early 1980s to just 3 percent in 2014. And according to the 2013 American Housing Survey, units in small buildings with 2–4 units represented just 16 percent of multifamily rentals built between 2003 and 2013, and just 9 percent of all rental units built over this time period (Figure 3). In contrast, apartments located in multifamily buildings with at least 20 units made up the largest share of new construction—29 percent—during the past decade, followed closely by single-family detached rentals.
Note: Data includes vacant for-rent units and those that are rented but not yet occupied. 
Source: JCHS tabulations of US Department of Housing and Urban Development, 2013 American Housing Survey.  

This decline in the number of new rentals in small buildings with 2–4 apartments is concerning given that units in these structures are typically more affordable than those located in larger buildings. In 2013, 63 percent of units in buildings with 2–4 apartments rented for under $800 a month, compared to 44 percent of those in buildings with 20 or more apartments. The age of rentals in the smallest multifamily buildings may help explain why these units tend to be more affordable than those in larger buildings. They tend to be older, with 44 percent of rental units in the smallest multifamily structures built before 1960, compared to less than a quarter of units in buildings with at least 20 units. However, even when accounting for units built in 2003 and later, those in buildings with 2–4 apartments are still more affordable than those in larger buildings.  Over half (55 percent) of new rentals located in multifamily buildings with 2–4 apartments rented at under $800 in 2013, compared to just 29 percent of units located in buildings with 20 or more units that charged rents this low (Figure 4).
Note: Data includes vacant for-rent units and those that are rented but not yet occupied. Excludes no-cash rentals and other rentals where rent is not paid monthly. Source: JCHS tabulations of US Department of Housing and Urban Development, 2013 American Housing Survey.  

Although rentals in smaller structures with 2–4 units have also remained a key source of low-cost housing, they are also at higher risk of loss. In addition to their age, units in smaller multifamily buildings are more vulnerable to being removed from the affordable stock because they tend to be owned by “mom and pop” investors—typically an individual or couple—who have narrow operating margins due to high property taxes, heavy debt loads and inadequate cash flow. As this 2009 Federal Reserve Bank of Boston report notes, many of these mom and pop landlords hold other jobs that account for most of their earned income and are less likely than owners of much larger buildings—a group that is often comprised of partnerships, real estate investment trusts or corporations— to make an operating profit from their buildings.

A number of barriers exist to developing rental housing at a price point ($875) that the typical renter can afford. At the local level, developers may be faced with land-use regulations that restrict the area available to build multifamily housing as well as the number of units in these developments. These limitations can result in higher per-unit construction costs that are also passed down to tenants in the form of higher rents.

What can be done in order to build housing that low- and moderate-income households can afford, including units near transit-accessible, amenity-rich locations? A recent Urban Land Institute report has suggested that local governments offer publicly owned land at reduced or no cost to developers in high-cost metros such as Washington, D.C., and co-locate affordable housing developments with new public facilities such as libraries or community centers. Local inclusionary housing programs can also facilitate the development of affordable new units, but the amount of affordable housing developed through these programs is small relative to the volume produced through federal subsidy programs like the Low Income Housing Tax Credit (LIHTC) program and HOME. In a 2010 report, the Innovative Housing Institute surveyed 50 inclusionary programs across the U.S. and estimated that they had produced more than 80,000 units since adoption. In contrast, over 2 million affordable rentals have been developed through the LIHTC program and 463,000 units through the HOME program to date.

Last month, Congress approved an appropriation of $950 million in funding for HOME in FY 2016, $50 million above the FY 2015 enacted level. Although this boost in funding represents a dramatic reversal from previous House and Senate proposals that had called for steeper cuts to HOME, the FY 2016 appropriation is still 56 percent below the FY 2006 level. Indeed, the strained fiscal climate may continue limit the availability of subsidies that make it economically feasible for both for-profit and nonprofit developers to build affordable rental housing. 

Tuesday, January 5, 2016

Housing Cost Burdens Weigh Heavily on Low- and Moderate-Income Renters Across the Country

by Ellen Marya
Research Assistant
The Joint Center’s new report – America’s Rental Housing: Expanding Options for Diverse and Growing Demandhighlights the now familiar trend of increasing affordability pressures facing renter households. As of 2014, just under half (49.3) of renters were housing cost burdened, spending more than 30 percent of income on housing costs. This share includes more than one-quarter (26.4 percent) of renters who were severely cost burdened, spending more than half of their income on housing. The burden percentage rates remain near their peaks reached in 2011. In total, 21.3 million renters were cost burdened in 2014, 11.4 million severely so, both all-time high numbers.

Notes: Moderately (severely) cost-burdened households pay more than 30% and up to 50% (more than 50%) of income for housing. Households with zero or negative income are assumed to have severe burdens, while households paying no cash rent are assumed to be without burdens.

Source: JCHS tabulations of US Census Bureau, American Community Surveys.

Our interactive map series, released in conjunction with America’s Rental Housing, illustrates that renters across the country are experiencing housing cost burdens at high frequencies. In the nation’s 917 metropolitan and micropolitan statistical areas, the cost-burdened share of renters ranged from about one-quarter to nearly two-thirds in 2014, with between 40 and 50 percent of renter households housing cost burdened in the typical metro. Over half of renters were housing cost burdened in more than 200 metro and micro areas. Among these highly burdened localities are some of the nation’s largest metros, such as Miami, Los Angeles, New York, Philadelphia, and Atlanta. Also highly burdened were many smaller areas either with particularly high housing costs, such as Santa Cruz, Key West, Juneau, and Olympia, or with significantly lower incomes, such as Laredo, TX, Monroe, LA, Las Cruces, NM, and Flint, MI.

The link between low incomes and high cost burdens is evident across the country, and for those with the lowest incomes, housing cost burdens were nearly unavoidable. Among renters with household incomes under $15,000 per year – equivalent to full-time work at the federal minimum wage – just under 84 percent were housing cost burdened nationwide in 2014. Rates reached upwards of 90 percent in over 100 areas both large and small – Denver, Los Angeles, Dallas, Milwaukee, Walla Walla, WA, Sheboygan, WI, and Grand Forks, ND – and were above 50 percent for all but two small micro areas – Beatrice, NE and Ardmore, OK.

Even among middle-income renters with household incomes between $30,000 and $45,000, housing cost burdens are widespread. Nationwide, about half (48.4 percent) of households in this income group were cost burdened in 2014. Burdens for this group were especially high in several pockets across the country, typically in areas with especially high-cost housing. Upwards of 55-60 percent of moderate income renter households were cost burdened in metro and micro areas along both coasts, near major interior population centers such as Chicago and Atlanta, and in areas across Texas and northern Colorado.

These data show that, across the country, housing cost burdens are no longer a problem only faced by renters at the bottom rung of the income ladder. Indeed, their prevalence among moderate income renters is growing rapidly. Between 2001 and 2014, a time of strong growth in renting, the number of renter households with incomes between $30,000 and 45,000 increased by just over 13 percent. At the same time, the share of renters in this income group with housing cost burdens rose 11.5 percentage points from 36.9 to 48.4 percent, the largest jump among any income group. As a result, the number of moderate-income renter households with housing cost burdens increased by over 48 percent between 2001 and 2014. This dramatic rise underscores the growing affordability challenges facing America’s renters during a time of increasing demand for rental housing.

The dynamics of this demand, along with the supply response, market conditions, and policy challenges facing today’s renters, are explored in more detail throughout America’s Rental Housing.