A new report highlights the growth in renters among minority households and the baby-boom generation.
The worst housing market downturn in more than 60 years appeared to turn the corner in 2009, according to the just-released State of the Nation’s Housing 2010 report from Harvard’s Joint Center for Housing Studies. The annual report examines trends in the economics and demographics of housing.
The report also highlights the continuing changing composition of rental demand. Following is an excerpt from the report.
With homeowner markets stressed, the number of renter households rose by 3.4 million—or nearly 10 percent—between 2004 and 2009. The upturn was most dramatic in the Midwest, where renter household growth surged from a 2 percent drop in 2000 to 2004 to a 13.4 percent gain in 2004 to 2009. The South added the largest number of renter households, posting a 1.2 million increase in 2004 to 2009. This growth occurred despite a large falloff in both domestic migration (which has favored the South and West) and international immigration.
Minority households have contributed most of the growth
in renters. Hispanics and blacks each accounted for a quarter of the net increase in renter households in 2004 to 2009, while Asians contributed 9 percent (figure 27). The minority share of renters thus reached 45.1 percent last year, with Hispanics accounting for 18.3 percent, blacks 19.6 percent, and Asians and all other minorities 7.2 percent.
Immigration is driving the changing composition of rental demand. Continuing the strong growth posted in the 1990s, the foreign-born share of renter households increased from 17.4 percent in 2000 to 19.6 percent in 2009. The number of Hispanic renters has more than tripled from just 1.9 million in 1980 to 7 million.
With the share of minority renters rising, demand for larger and more child-friendly units is likely to increase. On average, minority renter households include 2.8 persons and white renter households include 2.1.
Even when controlling for age, minority renter households are larger. For example, among renters aged 35 to 44, minority households have an average of 3.2 people, compared with just 2.6 for whites. A major difference is in the number of children present. Among all renters under age 55, the average number of children is 1.1 per minority household but only 0.6 per white household.
Householders Aged 45 to 64 ‘Booms’
Despite the growing presence of younger minority households, the share of all renter households headed by young adults declined 4.5 percent between 2000 and 2009. Nearly two-thirds of renter growth was instead among households aged 45 to 64, reflecting the impact of the baby-boom generation.
Large increases in older renters in 2008 suggest that many households may have switched from owning to renting as the housing crisis took hold. Since older renters tend to prefer larger multi-unit buildings, particularly those with elevators, demand for this type of housing may well increase over the coming decade as the baby boomers enter retirement.
Other Key Findings
Interestingly, echoing NAA/NMHC’s advocacy about the greater labor market mobility of renters, the number and share of people changing residences dropped approximately 12.6 percent between 2005 and 2008 before stabilizing in 2009. The steepest declines were among homeowners, likely because the housing crash left many underwater on their mortgages, which made it harder for them to move.
• Multifamily housing starts dropped from 248,000 in 2008 to 109,000 in 2009—the lowest level on record. But because completions lagged starts, falling only from 301,000 to 274,000, the near-cessation of production has not yet been felt in the rental market.
• Two-thirds of renter household growth between 2000 and 2009 was among households aged 45-64, reflecting the impact of the baby boomers. The number of renter households over age 55 will likely rise by more than 3 million in the coming decade as baby boomers age.
This could increase demand for larger properties with elevators, which this demographic prefers.
• In a low-immigration scenario, the total number of renters is expected to rise by about 3.8 million from 2010 to 2020; in a high-immigration scenario, by 5 million. In either scenario, minority households will make up the majority of renters by 2020. This will help fuel demand for larger and more child-friendly apartments.
Excerpt reprinted from “The State of the Nation’s Housing 2010” with permission from the Joint Center for Housing Studies of Harvard University. All rights reserved.