Latest Tenure Report Shows Continued Gains in Homeownership
Today, Enterprise released the latest update to our on-going report on housing tenure – that is, whether people are owners or renters. It shows that the share of U.S. households owning their home increased for the 10th straight quarter, but the tenure gap between white and black households is at its widest in nearly 40 years.
The report is based on data from the U.S. Census Bureau’s Q4 2018 Housing Vacancy Survey (HVS), the release of which was delayed by a month due to the partial federal government shutdown earlier this year.
According to the HVS data, the national homeownership rate rose last quarter to 64.6 percent on a seasonally-adjusted basis. This is a 0.2 percentage point increase from Q3 2018, and 0.6 percentage points higher than a year earlier. The national rentership rate saw a corresponding decline, to 35.4 percent.
Analysis of tenure trends back to 1980 show that the recent pace of homeownership rate increases – up 1.6 percentage points since bottoming out in Q2 2016 – matches the largest rise in the share of owning households over those four decades. The last time ownership rates increased this much in a 10-quarter period started with Q3 1994, which marked the beginning of the mid-1990s-to-mid-2000s homeownership boom.
Despite these recent changes, the shares of owning and renting households remain a full percentage point from their long-run (1980-2018) averages of 65.6 and 34.4 percent, respectively.
Continuing Disparities in Homeownership by Race Contribute to Wealth Inequality
While the national trend in tenure rates has been steadily moving towards higher homeownership and lower rentership, not all subsets of households are experiencing this change equally.
Rates for Hispanic and Asian households continue to show homeownership increasing faster than among other subgroups, with growth of 0.9 and 1.2 percentage points in just the last year. Non-Hispanic White households also increased their homeownership rate, by 0.7 percentage points. Non-Hispanic Black households, however, became less likely to own their homes by 0.2 percentage points. The gap between Black and White ownership rates, at 30.9 percentage points, is the largest annual difference ever recorded by the HVS.
The implications of this disparity in tenure rates between White and Black households are considerable. Because homeownership creates opportunity for building equity, this gap will exacerbate the country’s already large racial wealth inequality, which in turn will inhibit economic mobility and access to opportunity for minorities.
More Young Households Owning, Though Most Still Rent
Since homeownership rates began their rebound, households with heads under 45 have seen the largest change in their tenure rates, which changed by 1.5 percentage points over the last 2 years. Households ages 45-64 report more modest changes in tenure rates, while seniors have actually increased their share of renting households, continuing a six-year trend for them.
Despite these changes, homeownership rates for younger households remain substantially below middle-age and senior households. Nearly two-thirds of households under age 35 rent, as do four out of ten households ages 35-44, compared to just 20-30 percent of older households.
The strong inclination to rent among younger households reflects both economic constraints and personal preferences. It also suggests that demand for rental housing from this group will continue to be strong, especially as more Millennials begin to form their own households. The supply of rental options, though increasing modestly in recent years, will need to expand further, especially in markets with high employment demand.
Tenure Change Steady by Income, Though Rebound Still in Process at the Top
The HVS reports tenure trends by income in just two groups – households with incomes below and above the national family median – which limits the ability to understand changes occurring within smaller segments of the income distribution. Still, existing figures are still useful for tracking broad patterns in owning and renting shares by income.
While below-median households persistently lag above-median households in their shares of homeowners, the difference in tenure rates between the two groups has declined to its smallest amount in the 25-year history of the HVS. A combination of smaller increases in rentership during the housing downturn for the lower-income group (+3.6 vs. +6.1 percentage points) and larger increases in homeownership since 2016 (+1.4 vs. +0.5 percentage points) drove this narrowing of the tenure gap by income.
With their relatively greater gains in homeownership, below-median income households now have a smaller rentership rate than they did in 1994 at the start of the housing boom. Above-median income households, meanwhile, have yet to reach their 1994 homeownership rate.
Owning and Renting Both Vital to Increasing Opportunity
Often lost in comparisons of homeownership and renting is the crucial role each plays in fostering economic mobility and access to opportunity for millions of households. On the one hand, wide gaps in homeownership rates among groups contribute to unequal distributions of wealth that compound over time. On the other, demand for affordable rentals continues to outstrip supply, leaving many households to sacrifice other needs to pay for housing.
These issues are especially acute in markets where employment often outpaces housing growth and high housing costs force many to choose long commutes to less expensive homes, adding to already critical levels of congestion and environmental damage.
To address these issues requires innovation, bold moves, and a holistic view of housing not just as owning and renting, but as a vital element in fostering individual and community success.
At Enterprise, we see housing as the key to improving opportunity in low-income communities, regardless of tenure. Through well-designed development that includes access to health care, education, transit, and jobs, all people can benefit from better and more affordable housing options.