As the recovery makes headway, housing patterns in the future are expected to shift significantly to accommodate an exploding renter population, according to a recent report by the Urban Institute, “Headship and Homeownership: What Does the Future Hold?” Between 2010 and 2030—the year Millennials reach peak homebuying age—new renters will exceed new homeowners by 4 million, proportioned as 13 million renters to 9 million homeowners, the report estimates.
“The rapid growth of the renter population will create significant demand for new rental housing construction and encourage shift of owner-occupied dwellings to rentals,” the report states. “In the next 15 years, many more rental households will form because of the size and ethnic composition of the millennial generation. Rental housing vacancy rates are already low, and rents are rising. Single-family homes are shifting to renter occupancy throughout the nation, and this trend is likely to continue.”
The report paints a stark portrait of housing in 2030—the homeownership rate, which fell to its lowest level in two decades earlier this year, is expected to drop to 61.3 percent, down from 65.1 percent in 2010, and less than half of Millennials (38 percent) will own homes. The total number of homeowners, however, will continue to see growth in that same period due to net household formation, the report explains.
Despite these projections (and a recent Demand Institute report indicating a Hispanic homeownership gap totaling 2.5 million), the Hispanic rate of homeownership is set to markedly improve. The homeownership rate among African Americans will move opposite, on track to land at 40 percent in 2030, and the disparity between the two will continue to widen over the next 15 years.
The headship rate, or the pace at which people form households, will decrease, carrying on a trend persisting since 1980. Household formations will take place largely among nonwhite populations—from 2010 to 2020, 77 percent of new households will be nonwhite, the report finds, and in the following ten years, 88 percent. Robust growth in household formation is likely for senior households (65-plus) as well, but nearly three-quarters of an anticipated 19.5 million will be white.
“This fall results from a combination of secular declines in homeownership for people of most racial and age groups,” the report concludes. “Those declines are a result of later age at first marriage and hence childbearing, stagnation of real incomes, changes in attitudes toward homeownership, student loan debt for those who do not finish college, tight credit, and the lasting impact of the Great Recession.”
To learn more about this report, visit UrbanInstitute.org.