BIPARTISAN POLICY CENTER
Growth in the 65+ population will create new demands for affordable, accessible housing
With the aging of the Baby Boomers, America’s population of seniors is growing and diversifying fast. Fewer seniors are disabled and more of them are financially independent, but the sheer size of the Baby Boom generation means that a large increase in the absolute number of seniors facing housing affordability and independent living challenges is inevitable. Aging is likely to pose special housing challenges for renters, minorities and rural Americans.
Seniors will contribute increasingly to housing supply
Seniors demand housing, but they also contribute to an important and growing share of the housing supply. Among adults entering their sixties, the pace of household dissolution begins to exceed that of household creation, meaning that this cohort releases more housing units into the supply than it absorbs. Just as the Baby Boom will swell the number of seniors in the next two decades, it will also swell the number of dwellings released into the housing market over the next four decades, creating new challenges and opportunities for housing policy. The increase is likely to be felt most acutely in the housing markets of the Northeast and Midwest, where the number of older homeowners seeking to sell their homes already accounts for a large share of the houses bought by younger homebuyers.
Echo Boomers represent a long-term opportunity for housing market recovery, but are struggling in the economic crisis
Echo Boomers (children of the Baby Boom generation born between roughly 1981 and 1995) are numerous and relatively well educated. They have also been hit hard by the recession as they’ve entered independent adulthood. This has reduced their income and employment and limited their ability to form households and attain homeownership.
Over the next two decades, the U.S. housing market will depend on Echo Boomers
The volume of housing demand over the next 20 years, especially for owner-occupied housing, will depend heavily on the economic and housing policy environment that confronts Echo Boomers as they mature from young adulthood into middle age. Regardless of the economy and policy, Echo Boomers will account for between 75 and 80 percent of the owner-occupied housing absorbed by people under 65 before 2020. A strong recovery with favorable housing market conditions would translate to substantial growth in Echo Boomer households. Resulting demand would help absorb houses that are currently vacant or being withheld from the market, and would accelerate a return to conditions that are conducive for residential construction. A weak economy and job market, by contrast, would substantially depress household formation and homeownership by this important segment of the population.
Rental housing demand is likely to climb in coming years
Rental housing vacancy rates have declined substantially in the past two years, and rents are increasing. This trend has come about because of a dual set of pressures. First, working-age adults 35 years and older either have shifted from owning homes to renting or are delaying the transition to homeownership. Second, Echo Boomers are maturing into adulthood, entering the housing market and searching for rental housing. As the economy and the housing market recover, older adults can be expected to shift back into homeownership. Even as this shift occurs, however, demand for rental housing will remain strong for several years because of continued household formation by Echo Boomers. Even with higher levels of rental-housing demand from 2010 to 2020, however, the most pessimistic demographic scenario developed here would result in national homeownership rates above 60 percent between now and 2030.
Black and Hispanic Americans have suffered significant setbacks in homeownership
The impacts of the housing crisis have been felt differently not only by different age groups but by different racial and ethnic groups. Homeownership fell modestly for white non-Hispanics under 65 and severely for black non-Hispanics between the ages of 35 and 64.1 Black homeownership was 28 percentage points below white homeownership in 2010, a wider gap than in 1990 or 2000. Hispanics saw a strong increase in homeownership during the housing boom but lost all of these gains in the bust; their homeownership rate lags white non-Hispanics’ by 25 percentage points. Largely as a result of this fall-off in homeownership, the median wealth of black and Hispanic households has declined by one-half to two-thirds.
About the BPC
“The Bipartisan Policy Center (BPC) drives principled solutions through rigorous analysis, reasoned negotiation, and respectful dialogue. Founded in 2007 by former Senate Majority Leaders Howard Baker, Tom Daschle, Bob Dole and George Mitchell, BPC combines politically-balanced policymaking with strong, proactive advocacy and outreach. As the only Washington, DC-based think tank that actively promotes bipartisanship, BPC works to address the key challenges facing the nation. Our policy solutions are the product of informed deliberations by former elected and appointed officials, business and labor leaders, and academics and advocates who represent both ends of the political spectrum. We are currently focused on health care, energy, national and homeland security, transportation and the economy.”