Growing Immigrant Population, Demographic Changes, Economic Pressures Cited As Key Drivers
Contact: Stacey Kerans, Fleishman Hillard
202/828-8859
Stacey.kerans@fleishman.com
Arlington, VA, May 11, 2009 – A new, independent report released today by the National Apartment Association projects demand for nearly $1.1 trillion in new apartment buildings by 2030, and estimates that homeownership in the U.S. could decline up to 8 percentage points or more, bringing U.S. homeownership rates more in alignment with several European countries. This report attributes the decline in homeownership and a rise in apartment living to a growing immigrant population, lack of affordability for many, emerging Y Generation households and a shift to more urban lifestyles that necessitate higher density residential options.
Homeownership levels in the U.S. reached a crescendo in the late 1970s, declined throughout the 1980s, and began rising again in the second half of the 1990s. Today, nearly 68 percent of Americans own their homes, according to the author of the report Christopher E. Lee, President of CEL & Associates, Inc. and Special Advisor to NAA.
“We’re seeing a number of factors — demographic, economic and environmental — aligning to create a significant shift in U.S. housing trends, one that will bring us nearer to a European model, where homeownership tends to be below 60 percent,” Lee said.
“It’s a striking trend — and one that is neither good nor bad, on its own,” National Apartment Association President Douglas Culkin said. “However it does portend a number of changes in where and how Americans live, and where government will need to place added focus and resources.”
“Lawmakers can no longer ignore the fact that there is, and will continue to be, a growing demand for quality rental housing options across the nation. Traditionally, the housing mix in the U.S. has been two thirds owners and one third renters. Over the next 10 years, that ratio could grow nearer to 60/40, and this trend shows signs of continuing through 2030.” Culkin said.
The report projects that the apartment renting population in the U.S. will grow by more than 10 million in the next 10 years, affecting public infrastructure needs, tax revenues, and the job market, added Culkin.
To read the executive summary and find out how to obtain a copy of the full report, visit The Future of Apartment Living in NAA's Web site.
Highlights from the NAA report include:
Generation Y Creates Demand
Nearly 85 million U.S. citizens are considered part of the generation born between 1977 and 1996. Their overall population is now larger than today’s Baby Boomer generation (76.9 million). As a whole, this generation prefers urban living over suburban, and often does not have enough savings or income to buy a home. In addition, Gen Y puts personal and professional/career development ahead of marriage. As a rule, this group has fairly high expectations of “work life balance,” making them more determined to avoid long commutes to work.
According to the report, currently, 57 percent of those under age 34 rent, and of those under age 45, 46 percent rent. By 2010 nearly 107 million people will be in the 18-44 age range (the prime renter group). By 2020 and 2030, this age group (the majority being Gen Y), will increase to 112 million and 118 million respectively, the report says.
If the percentage of 18-44 year-olds who rent increases due to inability, unwillingness and/or lack of desire to own a single-family home, potential renters could jump from 49.2 million in 2010 to as many as 63.7 million by 2030 – an increase of nearly 30 percent.
Job Growth in Urban Areas
More than 80 percent of U.S. jobs are located in urban areas and most are in the Top 50 DMAs. For a prospective home buyer with the traditional 30-percent income-to-loan qualifying criterion, the vast majority of young adults seeking work will not be able to own a home and are likely to be renters, many for much of their lifetime, the report says.
This demand for affordable and workforce housing will generate a wave of redevelopment, mixed-use and transit-proximate rental housing options in walk-able communities.
Affordability
With the U.S. economy experiencing a “paradox of thrift,” a declining consumer expenditure pattern, and a rising savings rate, the demand for apartment living should begin to increase dramatically.
Meanwhile, average household debt has nearly doubled and outstanding credit card debt is now over $900 billion. Additionally, flat or declining wages and less disposable income will contribute to real and perceived needs to reduce the cost of living expenditures and apartment homes tend to be less expensive than single-family homes or condominiums.
Hispanic Population Grows Rapidly – and Tends to Rent
In 2000 the U.S. was home to 35.3 million Hispanics. By 2010 this ethnic group’s population is expected to have increased more than 40 percent to 49.7 million and by 2020 the Hispanic population is expected to be 66.4 million. By 2030 the number of Hispanics living in the U.S. is projected to be 85.9 million – and 54 percent of the population growth in the U.S. between 2000 and 2030 will be Hispanic. This number does not include an additional estimated 12 million Hispanics living in the U.S. illegally.
Additionally, 54 percent of Hispanics rent. If this renting level percentage remains static, despite the current economic downturn which could cause it to rise, the number of Hispanic renters will likely increase from 19.1 million in 2000 to 22.7, 30.0 and 45.2 million in 2010, 2020, and 2030 respectively. The percentage of Hispanic renters could also rise if the current recession and recovery are prolonged.
An Aging Population
By 2010 40.2 million Americans will be age 65 or older. By 2020 and 2030 the number of U.S. residents age 65 and older will increase to 54.8 and 72.1 million. The oldest population (those 85 and above) is projected to double from 4.7 million in 2003 to 9.6 million in 2030 and double again to 20.9 million in 2050. The likelihood of renting increases as householders age. With increasing life expectancy, medical wellness advances improving healthcare services more accessible, the number of aging Americans will increase, creating new and additional demands for senior housing options.
“What we need is government and regulatory recognition that rental housing must be a priority to bring the workforce closer to available jobs and provide a shelter option for those with reduced financial means, which will serve as a catalyst for urban renewal,” added Lee.