As the housing recovery continues, it’s expected housing patterns will change significantly during the next few years in order to accommodate a much larger renter population.
The change is being predicted by a recent report by the Urban Institute called “Headship and Homeownership: What Does the Future Hold?” As the report points out, millennials will reach their peak home buying age between the years of 2010 and 2030. The report estimates that new renters will exceed the numbers of new homeowners by 4 million, equating to 9 million homeowners compared to 13 million renters.
This means the proportion of the population choosing to rent will create significant demand for new rental housing and will see a shift of owner occupied homes to rental homes. During the next few years it is expected that many more rental households will form because of the size of the millennial generation. Currently rental housing vacancy rates are already low and rents are continually rising. Single-family homes are changing to become renter occupied right throughout the nation, a trend that is likely to continue.
Homeownership rates dropped to their lowest levels in two decades earlier in 2015 and it’s anticipated that by 2030 rates will drop to 61.3% compared to 65.1% in 2010. By this stage less than half of millennials will own property. In spite of these figures the total number of homeowners is expected to continue to grow during this period due to new household formation. In addition, the rate of homeownership amongst the Hispanic population is predicted to improve significantly while homeownership rates among African-Americans will move in the opposite direction and is predicted to be 40% by 2030.
The rate at which new households are formed will decrease, a trend that has been persistent since 1980. Household formation will generally take place amongst non-white populations and 77% of new households will be non-white by 2020, rising to 88% by 2030. Household formation amongst senior households aged 65 or older is expected to be robust but nearly three quarters out of the predicted 19.5 million will be white.
According to the report some of these declines are due to people marrying later in life and as a consequence delaying starting families, combined with stagnating incomes as well as a change in attitudes towards homeownership. The rates are also affected by people constrained by the effects of tight credit and high debt incurred through student loans.