Housing Vacancy Survey Report Q1 2019
Housing Tenure Trends Report Q1 2019
The U.S. homeownership rate declined in Q1 2019 by 0.3 percent on a seasonally-adjusted basis, with 64.3 percent of all households now owning their residences, according to data from the Census Bureau’s Housing Vacancy Survey (HVS). While not statistically significant, this slight drop represents the first decrease in almost three years and brings the national rate back to its Q1 2018 level. The share of renting households, meanwhile, increased to 35.7 percent.
Despite tenure rates remaining unchanged from a year prior, the estimated number of both renter and owner households increased by 458 thousand and 1.09 million, respectively. Caution is advised in interpreting these estimated numbers, however, which differ from official counts reported by other Census Bureau surveys.
These quarterly homeowner and rentership rates offer a quick glimpse at the status of housing conditions nationally, but do not tell a complete story about how trends in tenure rates are faring among subsets of American households. Specifically, national-level statistics can mask divergent trends by race, age, and income. Such detail is not only instructive for assessing the drivers of national trends, but can also provide insight into the sources of disparities in housing market affordability and access.
Updated graphics below demonstrate for whom tenure rates are changing the most, whether through increases in homeownership or rentership rates. These data also remind us that despite national gains in homeownership, millions of American households rely on rental units provided by private landlords to meet their shelter needs. It is crucial that the housing stock maintain and develop a diverse set of housing options so that all households, regardless of tenure choice, have access to suitable and affordable living quarters.
National Tenure Trends
The decrease in the national homeownership rate ends the 10-quarter streak that marked the recovery from the downturn in housing markets during and after the Great Recession. Whether this change represents a blip on that road, the start of a new era of increasing rentership, or a stabilizing of tenure trends remains to be seen.
Looking further back into the history of homeownership and rentership rates shows current levels are still off their long-term averages, with owners slightly below and renters above their shares from 1980-2018. Changes in the demographic composition of households, rising costs for buying and financing owned homes, and shifting opinions about the benefits of homeownership vs. renting are all likely contributors to this lower level of homeownership relative to the past.
Quarterly Tenure and Housing Cost Indices
To better assess relative trends in tenure rates, it is useful to view them as indexes relative to their 1980 levels, as shown below. Done this way shows that shifts in rentership rates are more dramatic over time, due to their lower shares. Said another way, the 6.2 percentage point swing in tenure rates during the housing downturn represents only a nine percent decrease record-high in homeownership rates, but an over-20 percent decrease in low starting rentership rates.
Comparing these indexed values to similar statistics on the costs of buying and renting housing adds another dimension to this analysis. Specifically, it reveals a disconnect between the demand for owning and renting housing and the costs to procure it. Both home buying and renting expenses have increased steadily over the last seven years, even as shares of owning and renting households have fluctuated. Indeed, relative to the past forty years, real rental costs are now higher than they have ever been, and the price of owned homes is rapidly approaching its former peak.
Tenure Trends by Age
When disaggregated by age, tenure rates reveal which groups are driving national trends and which are charting their own course. During the recent rise in homeownership rates, for example, younger households have been leading the charge, with increases of over 1.5 percentage points among both under-35-year-old and 35-44-year-old cohorts between 2016 and 2018. The shift tenure rates observed in the first quarter of 2019 continues this pattern, as households under 35 experienced a larger increase in share of renting households relative to older households, which helped elevate the national rentership rate.
At the other end of the spectrum, senior householders have seen their tenure rates move opposite the national trend, as the age group with the smallest decline in homeownership rates during the housing downturn, and the only group with an increase in rentership rates 2016-2018. Seniors are also the only age group whose homeownership rate remained above its 1994 level over the last 25 years, and to still be elevated above that point today.
Note that these groups are based on the ages of households at the time of observation and does not follow generational cohorts as they mature. Thus, while current tenure rates of under-35-year-old householders generally reflect conditions among Millennials, the same data in the late 1990s and early 2000s represents trends among Gen-Xers at that age.
Tenure Trends by Race/Ethnicity
The dominant trend in tenure rates by race and ethnicity continues to be the widening gap between non-Hispanic White and Black households, which reached a new high of 32 percentage points in the first quarter of 2019. Indeed, Black households are the only racial/ethnic subgroup to experience a net decrease in homeownership rates since 2016.
At the same time as the Black-White tenure gap is growing, the difference in owning and renting shares among Hispanic households has declined relative to Whites and is now tied with its lowest level in the 25-year history of the HVS data series, at just under 26 percentage points. This comes from notable increases in homeownership rates among Hispanics, including in the first quarter of this year as the national rate declined. Asian and other non-White households, meanwhile, saw a dramatic reversal of their recent tenure trend, with a nearly two-percentage point increase in their share of renting households.
Tenure Trends by Income
Another tenure gap that has seen continued narrowing since the end of the housing downturn is the spread between households with incomes above and below the median income for families and non-family householders. At 27.5 percentage points, this difference is also at a new record low for the 25-year HVS series.
Despite this narrowing and recent gains in homeownership rates among below-median income households, their renter share remains near 50 percent, reflecting the continued need for affordable rental housing option across the country.
While quarterly changes in tenure rates may appear small, these data represent millions of U.S. households living in owned and rented housing. A shift of even one-tenth of one percentage point in the homeownership rate can mean hundreds of thousands of additional households buying homes, often with the aid of a mortgage. A similar shift in rentership rates, meanwhile, means hundreds of thousands more households paying rent to their landlords while enjoying the flexibility to move for better jobs or neighborhoods when needed.
Disparities in tenure rates are also important, as they suggest different long-run opportunities for households by age, race, and income. High homeownership rates for non-Hispanic Whites relative to minority households means millions more of the former able to build equity over time, adding to already large racial wealth inequalities. The high shares of young and low-income households that rent, meanwhile, will continue to compete for the limited supply of affordable rental housing. Policy solutions are thus needed to address both these needs, but without giving preference to one form of tenure over the other.