Long-Term Housing Trends Reveal Widening of Racial Tenure Gap
Earlier today, Enterprise released the latest update to its Housing Tenure Trends report, which describes the homeowner and rentership rates of U.S. households as of the second quarter of 2019. These data show the share of households that owned their home declined again for the second straight quarter, to a seasonally-adjusted rate of 64.2 percent. The rentership rate, meanwhile, increased to 35.8 percent, it’s highest level since the end of 2017. Both changes represent further departures from long-run trends in owning and renting homes and a reversal from a two-year period of rising homeownership and falling rentership rates.
As in the past, the quarterly report looks at homeowner and rentership rates over time by age, race, and income. One of the findings of this analysis is a continuation of divergent housing tenure trends between white and black households, which has recently gained new urgency, including among some presidential candidates. To acknowledge this important issue, and to mark the first anniversary of Enterprise’s examination of these data, this quarter’s report also takes a deeper dive into racial tenure disparities and their implications for housing affordability, wealth inequality, and access to opportunity.
Data for the report are based on the U.S. Census Bureau’s quarterly Housing Vacancy Survey (HVS).
Tenure Rates and Housing Costs Over Time
Among the notable features of homeowner and renter shares over time is their decoupling from trends in housing costs by tenure, especially in the wake of the housing market downturn experienced in the late-2000s. Specifically, house prices and rents have risen steadily over the last seven years, despite shifts in the demand for owned and renting housing. Inflation-adjusted rents are now at their highest level in forty years, while home purchase prices are nearing peaks last seen during the 2000s housing boom.
For example, the median price for newly-sold housing, which fell dramatically after the national homeownership rate peaked in 2004, rebounded starting in 2012 even as the share of homeowning households was still declining. In the same vein, median rents continued to increase during and after the inflection in tenure rates in 2016 that saw demand for rental units fall. This evidence suggests caution in using high-level indicators of housing cost to make arguments about trends in demand for different tenure options.
Trends in Tenure by Age and Income
National data on ownership and rentership rates are also not always good barometers for trends occurring among subsets of U.S. households, especially by age and income. The recent two-quarter decline in homeownership rates, for example, was largely driven by changes in tenure patterns among the youngest age group, who experienced greater swings in their shares of owning and renting households relative to older groups.
Taking a longer view of these tenure patterns, we see that changes among younger households are often in step with national trends, while older age groups are more likely to ride out these swings with minimal effects. The generally lower ownership rates among households under age 35 drive this correlation, as this group experiences less tenure stability relative to older households with higher homeownership rates who change their tenure less often. That constancy suggests older homeowners are more insulated to the effects of short-term economic conditions, further explaining the disconnect between national tenure rates and housing costs.
By income, a similar story emerges in trends over time among households earning less than the national family median, who like younger households have lower homeownership rates and more tenure volatility. The exception to this is found in the most recent two quarters of increasing rentership rates, which was mirrored in the renting trends of higher-income households. Indeed, the slowing shrinking gap in tenure rates by income – currently at its lowest level in the 25-year history of the HVS series – indicates some shifting in this pattern, perhaps as more homeowning baby boomers retire (thus lowing their incomes) without changing their tenure status.
Trends by Race and the Black-White Tenure Gap
Just like with age and income, differences in tenure trends by race and ethnicity suggest other factors at play in shaping demand for owning and renting housing. Hispanic households, for example, consistently held steady or increased their homeownership rate each year since 2014, even as the national rate continued to fall, rose slightly, and then dipped down again in the first half of this year. As a result, their rentership rate declined to 53.0.
The pattern for non-Hispanic Black households, however, has been very different, with rentership rate increases recorded in 10 of the last 11 years. They are the only subgroup by race and ethnicity to have a lower homeownership rate in 2019 than in 1994, and their tenure gap relative to non-Hispanic White households is at a record high 32.3 percentage points.
This divergence in Black-White tenure trends has been identified as a factor in the rising racial wealth and opportunity gap, as well as a contributor to differences in housing affordability by race and ethnicity. Concerns about the long-term implications of this trend also extend to the homeownership prospects of the next generation of households, as parental wealth and tenure status are known contributors to the tenure outcomes of children.
Calls for renewed attention on addressing this gap are increasing in policy and advocacy circles, with proposed solutions ranging from racially- and geographically-specific homeownership assistance programs, enforcement and expansion of fair housing regulations to stimulate lending, and reformed zoning regulations to facilitate construction of more affordable home options. Homeownership alone, however, will not resolve the racial wealth gap, as deficits in income, education, health care, and access to opportunity are also needed.
Enterprise supports efforts to increase affordable and well-designed housing options for all households, especially in areas of opportunity. We are also proud members of the alliance behind Racial Equity Here, a national movement to create more equitable communities. Please visit our resource page on fair housing to learn more about this effort and our other racial equity work.