Despite my attempts to put an end to my summer “hiatus”, it’s kept on going. Well, I hope to be fully back and posting more regularly again.
During this presidential campaign season there has been tons written on the impact of our nation’s changing demographics on this and future elections. But I’ve seen precious little written about how the changing demographics will alter the way we live.
Until now. The Bipartisan Policy Center produced a study last spring entitled Demographic Challenges and Opportunities for U.S. Housing Markets that demonstrates some thinking about how changing demographics, specifically the aging of Baby Boomers and the maturation of Millennials, will shift the makeup of our society (one note: I found this through the Urban Institute’s website, which contributed to the report). The report looked at household data since 1990, with an emphasis on household formation patterns and ownership and rental rates by our dominant age cohort groups, and made some projections for the years 2020 and 2030. A one-sentence characterization of the report? Places that boomed over the last 20 years due to the rapid growth of single-family homes may be in for a swift and perilous transition.
Some of the key findings of the report:
Aging Baby Boomers will create a new demand for affordable and accessible housing between now and 2030. Our nation’s second largest age cohort group, emerging senior citizens, generally born between 1946 and 1960, will once again shape the housing market, as they look to find housing that will be less demanding and include more amenities that address their advancing age status.
Aging Boomers will also contribute to a growing supply of housing. The flip side of the demand that Boomers will create is the supply they will leave behind. The report notes that once seniors are in their sixties they begin to supply more housing through the reduction of their numbers than they create through new household formation, and this will also have an impact on housing markets.
Millennials will become the dominant generational force driving housing demand over the next two decades, but may likely lack the economic capacity to do so that the Boomers (and Gen Xers) enjoyed. Me and my fellow Gen Xers are about to be swept up in the tide of Millennials (most born between 1978 and 1992), our nation’s largest age cohort group, who will be looking to establish new households in the upcoming decades. However, the economic misfortune they’ve endured since the financial crisis of 2008 will have long-lasting effects and stunt their ability to purchase homes, and that too will have an impact on housing markets.
The shifts in demand and supply will ultimately lead to an increased demand for rental housing throughout the country. The report notes that homeownership rates peaked toward the end of the last decade, and that their forecasts suggest that they will continue to decline into the foreseeable future.
The takeaway from the report may be best captured by this quote:
“Despite potential increases in new construction, most of the houses that seniors will release in coming years were built when energy was inexpensive, nuclear families were the rule, incomes were increasing for most Americans, and mortgages were generally predictable and easy to obtain. Most observers expect the next 20 to 30 years to depart from this historic picture, with more expensive energy, growing diversity in race, ethnicity and in household structure, and more intense international economic competition. All of these factors will likely reduce demand for large single-family homes on large lots far away from established centers of employment and entertainment.”
The bulk of the report goes on to discuss how this should shift national housing policy in the years to come. However, I think that this will have a dynamic impact on metro areas around the nation, and the Urban Institute is beginning to recognize the implications. I found this report through an article on the Atlantic Cities website website that asked the question of whether Millennials, having “rediscovered” cities, will continue to stay there. It’s a little early to tell so far, but it is clear that Millennials are beginning to demand – and receive – services and amenities in urban neighborhoods that previous generations of inner city dwellers and urban pioneers were unable to acquire. Today the demand is for things like local commitment to transit-oriented development, dedicated bike lanes and an improved commercial development landscape, where feasible. The future may involve an even stronger demand for improved urban public schools, among other things.
The matter of who will be most prepared to handle the upcoming transition will determine the winners and losers at the local level. To my eyes, the places that will be able to 1) demonstrate a diverse housing stock and 2) easily convert existing single-family housing stock from ownership to rental will have a leg up in this transition. Those that sold out on the “American Dream” of homeownership featuring big homes on big lots – those not well-suited to downsizing – may suffer. Advantage: cities and inner-ring suburbs.
This is not to suggest that I believe that this is the start of a full-scale rejection of the conventional suburban development pattern, or that housing consumer appetites are changing. But I do think that, over the next couple decades, conditions will be more economically favorable for cities and inner-ring suburbs than at any other time in the last 70 years, and the result will be greater economic and demographic equity between traditional city and suburb than we’ve ever seen in our nation.
On a related note, I think our generational demographics, our economy and our primary development patterns are all at a point that have been reached only twice in our nation’s history – during and shortly after the Civil War, and the Great Depression/World War II era. Immediately following both of periods a new type of development pattern emerged in the nation, and that led me to consider a possible theory that might describe what our future might look like. The theory is likely to become a series that I’ll lay out in future posts.