The Joint Center for Housing Studies of Harvard University (JCHS) recently released its annual “State of the Nation’s Housing” report for 2018. This year’s report marks the 30th anniversary of the center’s comprehensive research on trends in the U.S. housing market.
To celebrate the report’s release, JCHS held a panel discussion on June 19, 2018, at the National Press Club in Washington, DC, with housing experts and economists, who reflected on the strides made since the release of the first report in 1988 and the challenges that remain. The panelists discussed current trends in the housing market, demographic shifts, and solutions to increase the affordable housing supply.
Daniel McCue, the senior research associate at JCHS, began the discussion with an overview of the rental market and homeownership trends presented in the report. Median rental housing costs have grown steadily for decades while median renter incomes have remained relatively stagnant. As a result, nearly half (47.5%) of the nation’s renters are cost-burdened, spending more than 30 percent of their income on housing. Vacancy rates in high-end rentals have increased, but vacancy rates for low-cost rentals have declined.
Although rental demand and construction of multifamily units increased following the Great Recession, a shortage of low-cost units persists. Unlike multifamily rental housing, the construction of single-family housing has slowed because of a shortage of buildable land, rising construction costs, and shifts in demand and personal preferences.
According to the report, baby boomers and millennials will drive housing demand and construction in the future. Seniors aged 65 and older make up a large share of homeowners, and many prefer to age in place, which will reduce turnover in the housing market. As a result, more construction will be needed to increase the housing inventory. In addition, seniors will need to modify their homes to better meet their needs as they age. Chris Herbert, managing director of JCHS, stated that housing experts should also consider seniors’ wishes to “age in community,” close to familiar services, social networks, medical facilities, and neighborhood amenities.
Millennials are fueling an uptick in household growth, although at a slower rate than past generations of the same ages. Yet, homeownership rates among young adults aged 25 to 34 are lower than they were 30 years ago, not only because of rising housing costs but also because higher education attendance rates have increased and marriage and childbirth rates have decreased. The 2017 homeownership rate for young adults has declined by 6.3 percent since 1987, with student loan debt hindering prospective buyers’ chances of qualifying for mortgages and negatively impacting credit scores if they default. Young adults repaying student loans may also have difficulty saving for a downpayment and transitioning from renting to owning.