By Mary Velan
Gov1
What Happened?
Recent studies suggest that homeownership across the country will remain low and many renters will continue to struggle to make monthly payments.
The Situation
The onset of the housing crisis forced many homeowners to leave their properties and move into rental units. This, in turn, put a strain on rental vacancy (which is at about 7 percent) and drove up prices across the country. This tight rental market, coupled with stagnant wage growth, has placed many individuals and families in a tough position when it comes to monthly rent payments. Furthermore, young professionals show no signs of diving into the housing market any time soon - which will further prolong the high rental prices in many cities.
Rental Burden
A recent study from the Harvard Joint Center for Housing Studies and Enterprise Community Partners projects the rental population in the United States to reach 4 million people over the next 10 years. Currently, it is estimated that nearly half of all renters spend more than 30 percent of their salaries on housing, while 25 percent spend half or more on housing. Economic indicators suggest these figures will only get worse over the next decade. The researchers argue the number of Americans paying 50 percent or more of their salaries on housing would increase by 11 percent to over 13 million people by 2025.
Where did they come up with these numbers?
The researchers analyzed a number of factors including:
- Estimated population growth
- Household formation
- Patterns in homeownership
The research predicts Millennials in particular will continue to feel the impacts from stagnant wages, high rental prices and decreased employment opportunities stemming from the recession over the next decade. Because this generation has been largely restricted in wealth accumulation, it is less likely they will be prepared to buy homes. According to the analysis, homeownership will remain low and many Americans will continue to pay a large percentage of their income on housing alone.
Low Homeownership
In addition, a separate study from the Urban Land Institute expects homeownership to continue to decrease for at least the next 15 years. The study explains millions of new households will form over the next 15 years, with new renters outpacing new homeowners. This will further increase demand in an already strained rental market and underscore gaps in housing policies across the country. The populations most directly impacted by this potential housing trend will be Millennials, seniors and minorities.
According to the study:
- 59 percent of the 22 million new households that will form between 2010 and 2010 will rent, while 41 percent will buy homes
- 11.6 million net new households will form between 2010 and 2030, 77 percent of which will be non-white
- 10.4 million net new households will form between 2020 and 2030, 88 percent of which will be non-white
- Overall homeownership rate will be 61.3 percent by 2030: 70 percent for whites, 40 percent for African Americans and 48 percent for Hispanics
- In the 1990s, 46 percent of people in their mid-20’s and 30’s were homeowners, by 2030 only 38 percent will own homes
- The number of senior-headed households will increase from 25.8 million in 2010 to 35.4 million in 2020 and 45.7 million in 2030
In response to the study’s findings, the researchers call for rapid growth of the rental market. This will include shifting owner-occupied dwellings to rental units - a move that has already been put into motion. In 2012, 35 percent of renters were in single family homes, up from 31 percent in 2005. But there will still be a significant demand for new construction of rental housing units.