Thursday, March 27, 2014

JCHS Releases New Household Projections

by Dan McCue
Research Manager
Today, the Joint Center for Housing Studies posted its latest household projections. These new projections incorporate several updates to data that were made since our last projections in 2010. The 2013 projections use the Census Bureau 2012 Population Projections (released in late 2012 and early 2013), and also use more recent data to derive headship rates (ratios of households per person), specifically using data from the 2011-2013 Current Population Estimates and Current Population Survey March Supplements.   

Aside from the new data, the JCHS projection methodology remains largely unchanged from that used to create the 2010 series. The most notable change is that unlike in 2010 we do not make any adjustment to the Census Bureau’s population projections, as our concerns about what seemed to be overly high estimates of future immigration levels have now been addressed in the latest projections from Census. Since we are using the 2012 Census population projections as published, the 2013 JCHS household projections now contain high, middle, and low series, whereas the 2010 projections only had a high and a low series. The projections are also carried out an additional ten years, and so now extend to 2035.

The 2013 JCHS household projections are consistent with those from 2010.  In the near term (2015-2025), they call for annual household growth rates ranging from 1.16 million in the low series to 1.32 million in the high series, not far from the span of 1.15–1.36 million per year in our 2010 projections.  Differences between the 2013 and 2010 series largely follow differences in the underlying population projections (Figure 1).  Some difference is also due to updated headship rates, which are calculated for every 5-year age group by race and averaged across the years 2011, 2012, and 2013.  These are now slightly lower overall than those from 2007, 2008, and 2009 used in the 2010 projections (Figure 2).  (Click to enlarge.)

Sources: 2008 and 2012 Census Bureau Population Projections and 2010 JCHS Household Projections.

Note: Adult headship rates use CPS/ASEC household counts and Census July 1 Estimates of the population age 15 and older.  Source: JCHS tabulations of Census Bureau data.

Like the 2010 projections, our 2013 household projections also anticipate substantial growth in minority, senior, and single-person households in the coming decades (Figure 3).  In the 2015-2025 period for instance, minorities are projected to account for just over 76 percent of all household growth in each of the low-, middle-, and high- projections, with Hispanics alone accounting for 40 percent of total household growth. Additionally, growth in the number of households age 65 or older during this period is also expected to be 91 percent of the net change in households under the low projection and 81 percent in the high projection. As a result of the growth in senior households, single-person (4.4-4.7 million) and married-without-children households (4.0-4.3 million), two of the largest groups that comprise senior households, will together comprise nearly three quarters of all household growth in 2015-2025, but the number of married with children households will also see some growth as millennials age.

Source: 2013 JCHS Household Projections.

Tenure Scenarios Presented as Well

The report also includes a simple homeowner and renter projection scenario.  Under a steady-state scenario of constant homeownership rates by age, race, and household type, this analysis offers one look at how demographic changes in the composition of households may influence future homeownership rates. In this scenario, changing demographics are expected to be a positive influence on the overall homeownership rate through about 2025 (Figure 4).  After that time, the upward influence of the aging of the population gives way to greater downward pressure from young adult and minority household growth.  Figure 4 shows how downward pressure on homeownership rates is steepest in the high projections which, unlike the middle- and low-projections, expects no demographically driven growth in homeownership rates through 2025.

Note: Homeownership rates by age, race/ethnicity, and household-type are held constant. 
Source: Joint Center for Housing Studies tabulations of 2013 JCHS Household Projections.

Users of these estimates are cautioned that that they should be considered baseline projections and not a growth forecast. Actual household growth could deviate dramatically over short periods of time, as the projections reflect long-run, demographically driven trends and do not allow for any adjustments either upward or downward in response to changing economic conditions or cyclical factors.  Indeed, favorable economic conditions could increase headship rates above levels assumed in the projection and increase household growth, while a variety of factors could weigh down economic opportunities and result in lower household formation rates that depress future household growth.  

Monday, March 17, 2014

Build It and They Will Come – Or Will They?

by George Masnick
In a previous post, I suggested that elderly baby boomers may be less likely, in the future, to move to newly built “senior” housing in the numbers that many housing analysts expect. Baby boomers might indeed be better off if they did move – to new housing that is smaller in size, on one level, handicapped accessible, easier to care for, convenient to public transportation and/or within walking distance to shopping and services, more energy efficient, and generally more affordable (lower taxes, utility costs, upkeep, etc.).  It would appear likely that there would be a strong demand for such housing, and public and private initiatives are underway to create such housing. But will aging boomers move to it?

Arguing against a high demand for senior housing among aging baby boomers is the fact that most now live in owner occupied housing with which they are quite happy. Almost three quarters of those over the age of 45 in a recent AARP poll strongly agreed with the statement: “What I’d really like to do is stay in my current residence for as long as possible.” Owners over the age of 65 have had very low mobility rates (about 2 percent per year) that have shown no signs of increasing in recent years.  Large cohorts of young adults who will come of age over the next two decades will compete for newly built housing.  This could very well maintain recent patterns of housing consumption where the young are over-represented in newly built units and the elderly are under-represented relative to their share of all households.

In addition, there are hosts of demographic, social, and economic trends affecting aging baby boomers that argue against any significant future increase in geographic mobility for persons over the age of 65.  I will address a few in some detail and mention others in passing.

Longer Working Life – Labor force participation rates for those over the age of 65 have increased steadily since 2000, growing by 38 percent for men and 66 percent for women. Increasing life expectancy, high middle-age divorce rates coupled with lower remarriage rates among older women, and employment in jobs increasingly less likely to carry retirement benefits are all trends that support both the overall upward trend and the gender differential in elderly labor force participation. For many elderly in the labor force, going to work is something they look forward to and are not eager to give up.  An Urban Institute analysis of the 2002 Health and Retirement Survey found that over 95 percent of employed persons over the age of 65 agreed or strongly agreed that they enjoyed going to work. Longer working life will help to postpone retirement migration (although some retirees who move to retirement destinations might seek new employment there), and the longer retirement is delayed the more difficult it might be for individuals to relocate once retirement finally happens.  

More Two-Earner Households – Today, about 70 percent of baby boom wives are in the labor force (Figure 1). Given the 84 percent labor force participation of baby boom husbands, a clear majority of married couples are dual-earner households. As boomers age, we expect this cohort to have higher labor force participation rates for both men and women over the age of 65 than the generation that came before them.  This trend is significant for future elderly mobility rates.  When one spouse is “ready” to retire and the other is not (either because of age difference or preference to keep working), retirement mobility is less likely.  If both spouses postpone retirement, mobility over the age of 65 is even less likely.  

Age Differences Between Spouses – With delayed marriage and the high incidence of divorce and remarriage in the U.S., it becomes more likely that the next generation of elderly will have more marriages with large age differences between spouses. These trends further compound the effect of dual-earner couples on lowering residential mobility rates when the oldest spouse is ready to retire.

The Effects of the Great Recession – Just as one can argue that the Great Recession has given the elderly greater incentives to work later in life, the same factors have reduced housing turnover. Falling home values and loss of home equity, and a higher share with mortgages that are under water, have made selling one’s home and moving less attractive.  Even for those with low or zero outstanding mortgages, selling their home for significantly less than what it was worth before the Great Recession is a difficult pill to swallow.  There is always the hope that prices might soon rebound.  For many with mortgages that they have recently refinanced to take advantage of historically low interest rates, there might be a “lock in” effect that makes it more difficult to purchase a different house requiring a mortgage at higher rates.  These factors affect mobility rates of both the young and old. 

Population has Shifted to the South and West – Historically, retirement migration has favored Sunbelt states in the South and West.  But the majority of the population that will cross the 65+ age threshold over the next 20 years already live in the South and West (Figure 2a).  Shifting regional population concentration is a result of both historically higher birthrates in the South and West, and because these regions have been destinations for in-migrants, both domestic and foreign. A significantly higher share of the population age 45+ living in states the South and West were born in another state (Figure 2b).  In a very real sense, there is less of a need for Sunbelt retirement migration – yet another factor that could dampen aggregate baby boomer mobility rates in old age.

Source: 2012 American Community Survey from Census Bureau American Fact Finder – Table B06001

Movers vs. Stayers – Consistent with the very low mobility rates of elderly owners is the fact that a majority of owners age 65+ have been living in their current home for a long time.  According to the 2011 American Housing Survey, almost 60 percent of owners age 65+ have lived in their homes for over 20 years.  This share has been constant for the past decade.  The older the owner the higher the share, with 51 percent of owners age 65-74 being long-term residents, 64 percent who are age 75-84, and almost 75 percent of those age 85+ being 20+ year residents in their current home.  Those who are more prone to move are likely to do so when they are younger – leaving behind a residual group more likely to composed of stayers.   Many baby boomers with the highest propensities to move have already adjusted their housing before age 65 and may feel less of a need to do so in the future.

Later Age at Becoming Grandparents – More women are having their first child later in life.  Over the past four decades, the average age of first time mothers increased 4.2 years, from 21.4 years in 1970 to 25.6 years in 2011.  In many European countries, age at first birth is 3-4 years later, suggesting that there is still some room for upward movement in this trend in the U.S.  Birth rates for women over the age of 30 have increased steadily from the mid-1980s to the onset of the Great Recession (Figure 3).  Later age at childbearing has translated into later age at becoming a grandparent for the women’s parents. Today, many men and women in their 60s are becoming grandparents for the first time, and still more have a youngest grandchild who is still a toddler.  This would be particularly true for the more highly educated grandparents who were more likely to have had their own children at later ages.  While I can offer no hard data, I suspect that later age at becoming a grandparent should motivate older couples to hold onto their too-large houses to facilitate the regular (or occasional) visits from their children and young grandchildren.  Having young grandchildren would also perhaps make long-distance retirement migration less attractive.

In addition to the factors just mentioned, the development of the internet and all that it implies for communication with relatives and friends, shopping, health care, working from home, and a host of other details of daily living, could help older folks stay in their homes, if that is what they want to do, a bit longer than they might have in the past. Still, it must be acknowledged that by virtue of their very large numbers, aging baby boomers could contribute to a growing numerical demand for senior housing even if their mobility rates are lower than the previous generation’s.  My argument is that the demand just might not be as large as some are predicting. What seems certain, however, is that more focus is needed on helping seniors who are aging in place.  This includes such things as help in retrofitting and maintaining their housing; help with transportation; and supporting senior centers that provide meals, social activities, and information/advocacy across a wide scope of services that senior’s need.  

Monday, March 10, 2014

Advancing Inclusive and Sustainable Urban Development

by Eric Belsky
Managing Director
Tackling urban poverty and attending to its spatial manifestations is vitally important. The speed with which many regions of the world are urbanizing, the haphazard spatial development of urban areas, and the deplorable living conditions of more than 800 million slum dwellers make the need to address urban poverty more urgent than ever. Climate change is only intensifying the necessity to act, as the urban poor tend to occupy land susceptible to physical risk, such as steep slopes, flood plains, or low-lying coastal areas made more vulnerable with extreme weather and climate variability. At the same time, however, government and business leaders are awakening to the potential to advance social and economic development by engaging the urban poor as consumers, producers, asset-builders, and entrepreneurs.

The Joint Center’s recent report, Advancing Inclusive and Sustainable Urban Development: Correcting Planning Failures and Connecting Communities to Capital, highlights the challenges of tackling urban poverty as well as promising strategies to do so. Obstacles to addressing slums and realizing the potential of slum residents include weak, non-participatory, and uncoordinated urban planning. National governments often establish regional authorities or public-private partnerships to plan major investments in urban infrastructure that fail to consider broader regional land use planning goals, community input, or the needs of poor communities. Local land use regulations and plans, to the extent that they exist at all, are not widely followed. Plans for slums seldom situate them in the context of broader plans for the urban region. And the non-governmental organizations that do much of the work to improve slums rarely coordinate their efforts. In addition, community-based organizations often are weak and not incorporated into the government’s urban planning process.  Finally, these governments, authorities, and partnerships generally fail to formulate specific strategies to improve or redevelop slums in ways that leave the poor better off.

Yet many examples of better planning practices exist around the world: efforts to develop national strategies for urban development and poverty alleviation, metropolitan regional planning and governance, anticipatory planning for urban growth and climate change, spatial planning and coordination of land uses and investments, participatory planning and community engagement, asset building for the poor, and institutional transparency and accountability through initiatives such as participatory municipal budgeting.

Drawing on these positive examples, several strategies emerge to improve urban planning and investment in order to spur inclusive and sustainable urban development. Most important, spatial planning must be fully integrated with investments in infrastructure, and the development of regional plans must involve participation by all stakeholders. A variety of practices can support inclusive, integrated planning such as funding for multi-stakeholder planning at the regional level and investment in community-based organizations and their intermediary supports. Government capacity can be built through national urban development commissions—spurred by intergovernmental, international bodies—charged with developing plans for inclusive and sustainable urban development. Technical assistance and capacity building can help national, regional, state, or local governments form and manage public-private partnerships, optimizing the use of scarce public resources while also introducing stronger and more rational spatial and participatory planning techniques into the process. A host of other tools described in the report can support more coordinated planning and investment as well as innovation in employment and small business, housing, and infrastructure programs in slums.

Taken together, these actions would greatly improve planning for inclusive and sustainable urban development and create an international movement to focus on these issues. With a growing list of examples of best practices to address urban poverty in effective ways (many summarized in the report), the Millennium Development Goals established by the United Nations still before us, and a chorus of globally-branded businesses (including McKinsey and JP Morgan Chase) calling for better urban planning and poverty amelioration strategies, there is a chance that these issues will gain the international attention they deserve and lead to concrete actions.

Read the new Joint Center report: Advancing Inclusive and Sustainable Urban Development: Correcting Planning Failures and Connecting Communities to Capital

Monday, March 3, 2014

The U.S. Rental Crisis: HUD Secretary Keynote & A New Tool from the Urban Institute

At a recent event in Washington, DC, the Joint Center released its biennial America's Rental Housing report. Shaun Donovan, U.S. Secretary of Housing and Urban Development, delivered a keynote about the issue of rental affordability in the U.S, which he called a "silent crisis" as America's lowest income renters have seen their incomes steadily go down while their rents steadily go up.  Watch Secretary Donovan’s keynote below.

Further illustrating the points made in our report, and by Secretary Donovan, the Urban Institute this week released an interactive map, showing the gap in affordable housing in the U.S. Nationally, for every 100 extremely low-income renter households, there are only 29 affordable and available units. Explore the Urban Institute's map to see the situation in your area.