An Urban Institute report titled Headship and Homeownership: What Does the Future Hold? estimates that the number of new renters will outpace new homeowners in the coming decades. The report expects an additional 13 million renter households by 2030, compared to nine million additional homeowners. The homeownership rate will continue its decline, from 65% in 2010 to 61% by 2030.
The report projects that the number of renter households will grow from 40.7 million in 2010 to nearly 48 million by 2020 and 54.1 million by 2030, a level of growth exceeds that of previous decades. Renters accounted for 28% of new households formed between 1990 and 2000 and 45% between 2000 and 2010. In contrast, renters are expected to account for 62% of new households formed between 2010 and 2020, and 56% between 2020 and 2030. The factors contributing to this increase include income stagnation, a decline in income for 25- to 34-year-olds since 1996, student loan debt, lingering effects of the foreclosure crisis, tight credit, and delayed family formation among the millennial generation, which has surpassed the baby boomer generation in size. The study also estimates that homeownership rates among African Americans will fall further behind other populations. African Americans continue to have lower wages than other racial groups and were especially hard hit by the housing crisis.
The researchers used Census data to examine household formation and changes in homeownership by age and race from 1990 to 2000 and from 2000 to 2010. They calculated the change in homeowner rates between 2000 and 2010 and the average change in these rates between 1990-2000 and 2000-2010. The researchers then estimated household formation and homeownership for 2020 and 2030 using a slow scenario assuming growth in household formation and homeownership similar to the smaller of the two growth rates, a fast scenario assuming growth at the maximum of the two rates, and an average scenario assuming growth at the average between the slow and fast scenarios.
The study concludes that significant growth in the renter population combined with already low vacancy rates will lead to even higher rents unless new development can keep up with new demand, particularly in fast-growth areas. Because discrimination in education and employment also influence the ability to become a homeowner, the report adds that housing policy is not the only avenue for addressing the racial gap in homeownership.
Headship and Homeownership: What Does the Future Hold? is at http://www.urban.org/research/publication/headship-and-homeownership-what-does-future-hold/view/full_report