The 21st century opened with a historic housing bubble, and a housing market crash to match. Those events are receding into the past, but the effects linger in the form of a brutal housing market hangover. The numbers tell the tale: an eight-year decline in homeownership rates, erasing the homeownership gains from the end of the last century, a rise in rents for the slice of the population who used to be owners, and a shortage of available rental units — especially in the affordable end of the market.
The New York Times has a report (see: “More Americans Are Renting, and Paying More, as Homeownership Falls,” by Dionne Searcey). “The nation’s homeownership rate has been falling for eight years, down to 63.7 percent in the first quarter of this year from a peak of over 69 percent in 2004, according to a new report released on Wednesday by Harvard University’s Joint Center for Housing Studies,” the Times reports. ‘The flip side of the decline in homeownership is a boom in rentals and a significant rise in the cost of renting. On average, the number of new rental households has increased by 770,000 annually since 2004, the center’s report said, making 2004-14 the strongest 10-year stretch of rental growth since the late 1980s.”
The Harvard Joint Center’s report is posted on the organization’s website (see: “The State of the Nation’s Housing 2015”). Americans born between the mid-1960s and the mid-1980’s, the so-called “Generation X,” took a major beating in the housing crash, the Joint Center reports: “Just before the crash, younger gen-Xers were in the prime first-time homebuying years while older members of this generation were at the stage when households tend to trade up or make significant improvements to their existing homes. When prices plummeted, many of these owners had little or no equity to weather the recession. As a result, homeownership rates among gen-Xers—now mostly in the 35–44 and 45–54 year-old age groups—have fallen further than those of any other age group, and stand 4–5 percentage points below rates among same-aged households 20 years ago. Whether these households eventually catch up to the baby boomers in terms of homeownership is unknown.”
Now, Gen-X households and younger generations aren’t just finding home ownership a tough climb — they’re also finding it hard to afford the rent, as multifamily developers focus on high-end rental projects. Tight rental markets aren’t just confined to booming coastal cities like San Francisco or Boston, either, reports Bloomberg — inland cities like Denver are also experience a scarcity of middle-market apartments (see: “Where Are All the Middle-Class Rentals?” by Patrick Clark.
“In Denver, the story of the rental affordability crunch starts at the tail end of the housing boom, after the easier path to home ownership had curtailed demand for new rental apartments,” Bloomberg reports. “The local economy roared to life after the recession, workers flocked to the city, and rental prices shot up. Rents rose 10.2 percent last year, according to a February report from Zillow, the third-highest rate among U.S. cities, after San Francisco and San Jose.”
“In addition to higher absolute rents, apartment dwellers are paying more for less,” Bloomberg notes. “Two-thirds of new apartments built in Denver from 2010 to 2015 were one-bedrooms or studios, compared to just under half from 2000 to 2009, according to Pat Stucker, managing director at Jones Lang LaSalle's Denver Capital Markets group. Downsized apartments include new pie-slice units at Turntable Studios, a circular building that was once a downtown hotel. The smallest are 330 square feet and rent for up to $1,000 a month.”