Are Baby Boomers Propping Up the Homeownership Rate?

by Rocio Sanchez-Moyano
Research Analyst

The US homeownership rate peaked in late 2004 and has been in a steady decline ever since, dropping 5.5 percentage points, according to the Housing Vacancy Survey. Annual homeownership rates for 2014 were back down to 1994 levels, and the quarterly homeownership rate fell another 0.3 percent in the first quarter of this year, bringing it down to 63.7 percent, the lowest level since 1993.

Source: JCHS tabulations of US Census Bureau, Housing Vacancy Surveys.

Homeownership rate declines have been most dramatic for young and middle-aged households. Homeownership rates for households aged 35-44 have dropped fully 9.5 percentage points since 2004, while those for households younger than 35 (the prime first-time homebuyer age group) have also declined by 7.3 percentage points. In all, recent declines have more than negated the gains in homeownership rates made by all 10-year age groups of households younger than 65 since the previous low in 1994. Meanwhile, homeownership rates for households age 65 and up, already higher than most other age groups, grew by 2.5 percentage points in the 1994-2014 period. 

Source: JCHS tabulations of US Census Bureau, Housing Vacancy Surveys.

With such large declines in homeownership rates among younger age groups, the decline in the overall US homeownership rate could have been worse if not for the significant aging of households, which has moved larger shares of households into older age groups that have traditionally higher homeownership rates. Indeed, as baby boomers have aged, older cohorts swelled, while the smaller baby bust shrunk the number of middle-aged households. While the millennial generation is already larger than the baby boom was at similar ages, a sizeable share of millennials are too young to live alone (the youngest were born in 2004), and the household formation of older millennials has been delayed by high unemployment and low incomes. As a result, households aged 65 and older represented nearly 36 percent of household growth from 1994-2014. Their homeownership rates were already above 70 percent even in 1994 and have remained more stable during this time period. An additional 55 percent of household growth came from households aged 55-64. Though these households saw homeownership declines from 1994-2014, they typically have high homeownership rates (nearly 80 percent in 1994 and still 76 percent in 2014), so the growth in this group pulled up the average homeownership rate. In fact, if the age distribution of households today matched the younger-leaning distribution of 1994, the age-specific homeownership declines of the last decade would have resulted in nearly 5 million fewer owners and a national homeownership rate 3 percentage points lower than where it stood in 2014.

The aging of the population has been an important buffer against the homeownership declines of the last decade, but it cannot be a prop forever, as eventually baby boom households age into their 80s when homeownership rates begin to decline. And aging’s positive effects on the national homeownership rate will be more muted if homeownership rates among middle-aged households of the future are lower than those of the baby boomers at similar ages. Furthermore, it remains unclear how much the homeownership rates of younger households will recover. According to Fannie Mae’s National Housing SurveyTM, the desire to be a homeowner remains a common goal, particularly among young renters, 92 percent of whom report hoping to own one day. But renters of this age also express concern that their finances are holding them back: 42 percent believe they cannot afford costs related to purchasing a home, including the downpayment, and 47 percent think they have insufficient credit to obtain a mortgage. Those with student loan payments (which account for 42 percent of young renters) also fear they have too much existing debt to take on a mortgage. Recovering economic conditions should allow more millennials to form their own households, but it is difficult to say to what extent they will be able to enter the homeownership market.

Additionally, the growing minority share of households, particularly among millennials, will create some headwinds in the return to higher homeownership rates. Because minorities have historically lower homeownership rates, as they become a larger share of all households homeownership rates will decline unless their homeownership rates increase. For example, even if homeownership rates by racial/ethnic group had remained constant from 1994-2014, the increasing minority share would have resulted in a homeownership rate 2.5 percentage points lower than what actually occurred. Within age bands, increasing minority share resulted in steeper homeownership rate declines among younger households and muted homeownership gains for those  65 and older.

Note: White, black, and Asian/other households are non-Hispanic. Hispanic households may be of any race.

Source: JCHS tabulations of US Census Bureau, Current Population Surveys.

The Rise of the Single-Person Household

by George Masnick
Senior Research Fellow

Perhaps nothing speaks greater volume about changes in modern American life than the rise of the single-person household. A recent paper authored by Census Bureau researchers shows that a hundred years ago, fewer than six percent of all households consisted of people who lived alone. By 1940, that share had only inched upward to 7.8 percent. By 2013, at 28 percent of all households, it is now the second most common household type just behind married couples without minor children (29 percent), and well ahead of marrieds with minor children in the household (19 percent). In the 19^th and early 20^th centuries, single-person households consisted mostly of men, but the greatest gains in living alone during the past 50 years have been among women. Today, women head 54 percent of all single-person households. In the past, when living alone might have been a short-term condition, for many it is now a long-term situation, the result of a number of broad demographic and economic forces at work over the past half century: greater affluence, longer lives, later ages of marriage, higher divorce, smaller family sizes, greater labor force participation and financial independence of women, and stronger government safety nets across a wide spectrum of social programs.

In parts of the country the share living alone is much higher than the national average. In many counties in the nation’s mid-section, where outmigration of young adults have led to older populations, between 30 and 40 percent of all households are single person. In large cities, single person occupancy can account for 45 percent of all households. A Pew Research Center study of single-person households reports that in some neighborhoods in Manhattan and DC, the share of single-person households approaches two thirds. 

According to the 2013 American Housing Survey, single-person households are spread across all ages. About 28 percent of all single person households are under the age of 45, another 36 percent between the ages of 45 and 64, and 36 percent are over the age of 65. Among the elderly, the older the household head, the higher the percentage that live alone. Fully 43 percent of households headed by those over the age of 65 are single-person, with 65-69 year old heads having 34 percent, 70-74 year olds at 37 percent, and 75+ registering 52 percent. Aging baby boomers will drive the share of over-65 year olds living in single-person households even higher over the next two decades. 

As recently as 1940, 61 percent of single-person households consisted of renters, but today owners are in the majority, with the 2013 American Housing Survey reporting that 54 percent of single person households were owner-occupied. Between 2003 and 2013, owners accounted for 55 percent of the growth in single person households. Among single-person households under the age of 45, two thirds are renters, but among single-person households over the age of 65, owners are a strong 70 percent majority (Figure 1).

Source: Joint Center tabulation of 2013 American Housing Survey

Single-person owners and renters are markedly different in terms of the type of housing they occupy. Fully three quarters of single-person renters live in multi-family housing, but among single-person owners almost three quarters live in single-family detached units, and another 8 percent in single-family attached structures. Single-person owners also live in larger units, with 63 percent in homes with 3+ bedrooms. This compares to only 12 percent of single-person renters living in large units (Figure 2).

Source: Joint Center tabulation of 2013 American Housing Survey

The reason that more single-person owners live in larger units compared to single-person renters is that many widows and divorcees remain in their homes after life-course events have left them living alone. Almost three-quarters of single-person owners have been in their homes for 10 or more years, including 40 percent who have been there for 20 or more. This compares to only 16 percent of single-person renters having lived in their homes for 10 or more years. Among single-person owners over the age of 65, 59 percent have been in their home for 20 or more years and another 21 percent for 10-19 years. 

Of course, not all single-person owners have lived alone the entire time in the home they now occupy. While for many, living alone might be a relatively recent event; for others it has become a long-term situation. When becoming single in late middle-age, such as when adult children of divorcees leave home, or when a spouse dies at a relatively young age, staying put has many advantages - including a neighborhood support network, familiar routines, and an overwhelming need for some stability in at least this one dimension of a life that has been turned upside down. But for many, the longer one lives alone and the older one gets, the more difficult it becomes to make a housing adjustment that might make sense across a wide spectrum of criteria.

Because young and middle-aged adults who live alone are more likely to be renters and to have lived in their homes for shorter periods of time, they are most likely to have chosen a house or apartment that best meets their current needs - in location, tenure, size, and cost.  This could also be said of elderly renters who are more mobile than elderly owners.  Elderly owners, however, who have lived in their homes for many years, are more likely to be living in places that were more suitable to when they were married or had young children. A recent Joint Center report highlights housing issues faced by many older adults as they age in place, including housing cost burdens and a lack of accessibility features in homes that are increasingly important as they faces health and mobility issues. While that report did not focus on older single-person households in particular, many of the concerns that were raised for all elderly are magnified for this group as they lack a partner or companion who can help both financially and physically.

In general, housing markets in this country respond fairly quickly to changes in demand. The upturn in multi-family construction following the Great Recession is a case in point.  However, one area where housing markets have been slow to respond is to fill the demand for smaller, affordable single-family owned units that are geared to the older homeowner in communities where the elderly now live. Land cost and availability, regulatory constraints, high property tax rates, proximity to shopping and services, and difficulties accessing public transportation are all obstacles to building such housing where many elderly now live and wish to continue to live. Unless these obstacles can be overcome, aging in place will continue to increase the number of elderly who live alone in homes that are too large and costly to maintain, requiring being able to drive to shop and get to necessary services, and perhaps unsafe and difficult to navigate when health and mobility begins to deteriorate.

A Record of Steady Progress: Gov. Patrick and Predecessors Should Be Proud of Chapter 40B Contributions

by Rachel Bratt
Senior Research Fellow

Last December, the Massachusetts Department of Housing and Community Development released the latest figures on the percentage of affordable housing in each of the state’s 351 cities and towns. The numbers are encouraging.

In 1969, the Massachusetts legislature enacted the Comprehensive Permit Act, which mandates that 10 percent of each localities’ year-round housing stock be affordable to residents earning 80 percent or less of the area’s median income. While controversial in Massachusetts, across the country Chapter 40B is viewed as one of the premier state-level responses to addressing the problem known as “exclusionary zoning” – local zoning that, whether by intent or design, has an exclusionary impact, by severely limiting or excluding zoning for multifamily housing and/or the ability to build homes on small lots.

Chapter 40B has stood the test of time and has stimulated the construction or rehabilitation of over 60,000 affordable units, more than two-thirds of them rental housing. In 2010, Massachusetts voters reconfirmed their support for the statute. And for good reason; the law works.

Although progress has been slow, each decade, we observe more and more municipalities attaining the 10 percent goal and many others making significant progress. In 1972, shortly after Chapter 40B was enacted, only four municipalities had attained the 10 percent goal and only two more were close. By 1983, there was a six-fold increase in municipalities with at least 10 percent of their housing qualifying as affordable. Flash forward 40 years to the present, and 48 municipalities have now reached the 10 percent goal and another 39 are close – at 8 percent or better. This means that one-quarter of Massachusetts cities and towns are at or near the state-mandated 10 percent affordable housing goal. And, in terms of municipalities that are halfway or better toward meeting the 10 percent goal, one-half of the state’s 351 cities and towns have crossed that threshold. Contrast this with 1972, 1983, 1993 and 2001, when the 50 percent or better figures were 5 percent, 26 percent, 30 percent and 34 percent, respectively.

Both Republican and Democratic administrations deserve credit for the good news about Chapter 40B. With the end of Governor Deval Patrick’s term, and with him, his appointees at the Department of Housing and Community Development, it is timely to offer a special word of thanks for the leadership and guidance provided by former Undersecretary Aaron Gornstein. Since Gornstein assumed the position just three years ago, the state supported affordable housing through increased funding for both new development and preservation of existing affordable housing, expansion of state rental assistance, revitalization of state public housing, and the development of supportive housing for our most vulnerable populations.

Despite the continuing progress being made through Chapter 40B, there is still lots to be done to promote the state’s affordable housing agenda. In wishing Governor Charlie Baker well, I urge him, along with his excellent new Housing Undersecretary Chrystal Kornegay, to continue to focus on a range of serious issues: the need for long-term housing for the homeless population that simply needs a decent, affordable place to live; continued improvements to the state public housing stock; and working with municipalities and community-based organizations to promote comprehensive neighborhood revitalization.

Although residents of Massachusetts should be rightfully proud of our more than 30-year old “right to shelter” statute, we are far from achieving the U.S. housing goal first articulated in 1949, which is to provide “a decent home and suitable living environment” for all. To make further inroads on the enormously sad and embarrassing reality of housing problems facing lower income people, many veterans, elderly, and even middle income households, as well as people with various disabilities, there needs to be a serious dialogue about the importance of housing to the stability and well-being of families and to the health of the economy. While we have the capacity to produce great housing by nonprofit, for-profit, and public entities, still lacking is a national consensus and political will to make decent, affordable housing the cornerstone of a new domestic agenda.

This post originally appeared as an op-ed in Banker & Tradesman, and is reprinted with their permission.

Most Inadequate Condition Manufactured Homes Were Built After the Introduction of Federal Building Code

by Matthew Furman
Gramlich Fellow

Since 2000, nonprofits and government entities have increasingly sought to diminish negative perceptions associated with manufactured housing by sponsoring programs that replace substandard mobile homes with state-of-the-art, energy efficient units. As national organizations, such as the Corporation for Enterprise Development and NeighborWorks America, consider scaling up these programs, it is important for housing professionals to ask: what has worked and what has not in this policy space?

As a 2014 Edward M. Gramlich Fellow in Economic and Community Development at the Joint Center for Housing Studies, I had the opportunity to explore one aspect of this question: whether or not nonprofits should focus on replacing manufactured housing built before the introduction of federal building standards in 1976. Some replacement programs exclusively target manufactured housing built prior to the advent of the national building code for manufactured housing (“the HUD Code”) under the rationale that pre-HUD code units are in the worst condition.

The 2011 American Housing Survey (AHS) suggests, however, that units built prior to the introduction of this code in 1976 are not the most likely ones in the manufactured housing stock to be inadequate. In fact, while 10.6 percent of units built between 1970 and 1975 are in inadequate condition, the figure is 10.8 percent of those built between 1985 and 1990. More manufactured homes that are now in inadequate condition were built after the HUD code but prior to the code’s 1994 update (approximately 280,000 homes) than were built prior to the HUD code (144,000 homes).

Source: American Housing Survey, 2011

As shown in Figure 2, pre-1975 units do not demonstrate significantly higher levels of physical inadequacy than 1975-1995 units across a range of features. There are several plausible explanations for this phenomenon. First, the construction standards enacted after the HUD code might not have ushered in an epochal shift. Substandard materials continued to be used in construction into the 1980s; problems with unit installation on sites and enforcement of building standards can undermine the effectiveness of the HUD code. Second, the worst conditioned manufactured homes built prior to the 1976 code might have already fallen out of the market. The units that remain are those that have benefited from weatherization or maintenance.

Source: American Housing Survey, 2011

Roughly 10 percent of manufactured homes, which is approximately the percentage of units in inadequate condition for homes built from 1965-1990, may also represent a natural level of inadequacy for manufactured housing after twenty years in use. Figure 3 compares 2011’s stock of inadequate manufactured housing by year built with the inadequate stock from 2001. A relatively small uptick in the percentage in inadequate condition is evident among units older than twenty-five years. Particularly striking is the sharp decline during the 2000s in the number of inadequate units from 1960-1975: these units are leaving the housing stock. Meanwhile, the number of units from the 1980s in inadequate condition has risen sharply. What policymakers must consider is whether post-HUD code units built in the 1980s will soon leave the market at the same rate as 1960-1970s pre-HUD code units did during the 2000s. At present, the large number of inadequate condition units that were built after the HUD code suggests that the administrators of programs that aim to replace substandard housing should not limit eligibility to pre-HUD code units, which is a common practice. Instead, all inadequate manufactured units, regardless of the period in which they were built, should be eligible for replacement.

Source: American Housing Survey, 2001 and 2011

Read more in Matthew's Gramlich fellowship paper, Eradicating Substandard Manufactured Homes: Replacement Programs as a Strategy