Today’s and Tomorrow’s Housing Market: Conditions, Needs, and Policy Choices Chris Herbert NCSHA Annual Conference Boston, MA October 21, 2014 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Rental Markets © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Renting Has Increased Sharply Across Most Age Group Over the Last 10 Years Age of Household Head Source: JCHS tabulations of US Census Bureau, Housing Vacancy Surveys. 3 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Generating a Surge in Renter Household Growth Average Annual Growth in Renter Households (Millions) Note: Renter growth in 2013 in the HVS was calculated by averaging the number of renters in the first and second quarters of 2013 and subtracting the average number of renters in the first and second quarters of 2012. Source: JCHS tabulations of US Census Bureau, Decennial Censuses, Current Population Surveys(CPS), and Housing Vacancy Surveys(HVS). © PRESIDENT AND FELLOW S OF HARVARD COLLEGE And a Strong Recovery in Multifamily Construction While Single-Family Building Remains Depressed Note: Levels shown are seasonally adjusted annual rates averaged over 12 months to reduce volatility. Source: JCHS tabulations of US Census Bureau, New Residential Construction data. © PRESIDENT AND FELLOW S OF HARVARD COLLEGE In Fact, Most of the Recent Increase in Rental Supply Has Come from Single-Family Homes Note: Other units include mobile homes, trailers, boats, recreational vehicles, and vans. Source: US Census Bureau, 2006 and 2012 American Community Surveys. 6 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Supply Appears to be Catching Up With Demand Units (Thousands) Notes: Data cover investment-grade multifamily properties. Completions and changes in occupied units are four-quarter totals. Source: JCHS tabulations of MPF Research data. 7 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Strong Rental Demand Has Pushed Up Rents Even as Renter Incomes Have Fallen Steadily Percent Change in Real Median Value Since 2001 Notes: Values are adjusted for inflation by the CPI-U for All Items. Data exclude renters paying no cash rent. Source: JCHS tabulations of US Census Bureau, American Community Surveys. 8 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Renter Cost Burdens Spread at an Unprecedented Pace in the 2000s Shares of Cost-Burdened Renter Households (Percent) Notes: Moderate (severe) burdens are defined as housing costs of 30-50% (more than 50%) of household income. Households with zero or negative income are assumed to be severely burdened, while renters not paying cash rent are assumed to be unburdened. Sources: JCHS tabulations of US Census Bureau, Decennial Census and American Community Surveys. 9 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Renter Cost Burdens Are Worse on the Coasts But Very High in Markets Across the Country Notes: Housing cost burdens are defined as housing costs of more than 30% of household income. Households with zero or negative income are assumed to be burdened, while renters paying no cash rent are assumed to be without burdens. Source: JCHS tabulations of US Census Bureau, 2012 American Community Survey. 10 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Few Lowest Income Renters Escape Severe Burdens As Problems Creep Up the Income Scale Share of Renter Households (Percent) Under $15,000 $15,00029,999 $30,00044,999 $45,00074,999 $75,000 and Over Notes: Moderate (severe) burdens are defined as housing costs of 30–50% (more than 50%) of household income. Households with zero or negative income are assumed to be severely burdened, while renters not paying cash rent are assumed to be unburdened. Source: JCHS tabulations of US Census Bureau, American Community Surveys. 11 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Very High Shares of Lowest Income Renters Are Cost Burdened Everywhere, But Creep Up in the Income Scale in High Cost Markets Severely Cost Burdened Renters (Percent) Notes: Severe cost burdens are defined as housing costs of more than 50% of household income. Households with zero or negative income are assumed to be severely burdened, while renters not paying cash rent are assumed to be unburdened. Source: JCHS tabulations of US Census Bureau, American Community Survey, 2012. 12 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Affordable Supply Gap For Extremely LowIncome Renters Continues to Widen Note: Extremely low-income is defined as less than 30% of area median income. Source: US Department of Housing and Urban Development, Worst Case Housing Needs Reports. 13 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE As the Number of Very Low-Income Renters Has Grown, the Likelihood of Getting Assistance Has Fallen Very Low Income Renter Households (Millions) Share with Assistance (Percent) Note: Worst case housing needs are defined as renters with very low incomes (below half the median in their area) who do not receive government housing assistance and who either paid more than half their monthly incomes for rent, lived in severely substandard conditions, or both. Source: US Department of Housing and Urban Development, Worst Case Housing Needs Reports to Congress. © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Nearly Two Million Assisted Rentals Are at Risk of Loss from the Affordable Stock Notes: Other units include those with HOME Rental Assistance, FHA insurance, Section 202 Direct Loans, USDA Section 515 Rural Rental Housing Loans, USDA Section 538 Guaranteed Rural Rental Housing Program, and State Housing Finance Agency Funded Section 236. Data include properties with active subsidies as of May 16, 2014. Source: National Housing Preservation Database. © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Tax Credits Are Key Hope for Preservation And Necessary to Develop Rentals At More Affordable Price Points © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Homeownership © PRESIDENT AND FELLOW S OF HARVARD COLLEGE The Homeownership Rate Continues to Drift Downward along with the Number of Owners Source: JCHS tabulations of US Census Bureau, Housing Vacancy Surveys. 18 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE House Prices Continue to Recover, Having Gained Back More than 60% of Their Losses Single-family house price index (Jan. 2000=100) Source: CoreLogic National House Price Index (HPI), Single family attached and detached structures as of July, 2014 19 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE The Number of Underwater Properties Has Fallen Substantially, But Remains High 14 Residential Properties with Negative Equity (Millions) 12 10 8 6 4 2 0 Source: CoreLogic Equity Report, First Quarter 2014. 20 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Serious Delinquencies and Foreclosure Inventories Have Been Cut in Half, But Still Well Above Normal Source: JCHS tabulations of Mortgage Bankers Association, National Delinquency Surveys. © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Minority and Low-Income Neighborhoods Have Higher Shares of Homeowners with Negative Equity Share of Mortgaged Homes with Negative Equity (Percent) Poverty Rate Notes: Negative equity homes have mortgage balances that exceed current home values. Negative equity shares are averaged across neighborhoods. Neighborhoods are defined by zip codes and include 11,572 areas with at least 500 residents and with data available from 2000 to 2013. Minority (mixed/white) neighborhoods were more than 50% (10–50%/less than 10%) minority in 2012. High- (moderate-/low-) poverty neighborhoods had poverty rates of more than 20% (10–20%/ less than 10%) in 2012. Source: JCHS tabulations of Zillow® Real Estate Research and US Census Bureau, 2008-2012 American Community Survey 5-Year estimates. 22 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Homeownership Remains an Important Source of Wealth for Low-Income and Minority Households Median Housing Wealth as a Share of Household Net Worth (Percent) Notes: Data exclude renters and households with zero or negative income. Income quartiles are equal fourths of all households ranked by income. White, black and other households are non-Hispanic; Hispanic households can be of any race. Source: JCHS tabulations of Federal Reserve Board, 2010 Survey of Consumer Finances. © PRESIDENT AND FELLOW S OF HARVARD COLLEGE And a Fundamental Goal of People at All Ages Source: Drew and Herbert, 2012. Based on Fannie Mae National Housing Survey 2010-2012. © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Offering Some Hope for a Turnaround in Homeownership, Mortgage Payments Remain Affordable Relative to Rents Real Monthly Housing Costs (2014:2 dollars) Notes: Monthly mortgage payments based on median existing home price from NAR ® and assumes 20% downpayment and a 30-year fixed-rate mortgage from Freddie Mac. The monthly gross rent is the median gross rent from the 2012 American Community Survey indexed to the Consumer Price Index for Rent of Primary Residence. Both series are adjusted for inflation to 2014:2 dollars using the CPI-U for All Items. Source: JCHS tabulations of Freddie Mac, Primary Mortgage Market Survey; National Association of Realtors ®, US Census Bureau, 2012 American Community Survey; and US Bureau of Economic Analysis, Consumer Price Indices. © PRESIDENT AND FELLOW S OF HARVARD COLLEGE But Access to Credit Has Tightened for Low Credit Score Borrowers Note: Loans with missing credit score data were excluded. Source: JCHS tabulations of CoreLogic data. 26 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Declining Incomes Among Younger Households Key Factor in Homeownership Trends 25–34 Year Olds 35–44 Year Olds Note: Incomes are adjusted for inflation by the CPI-U for All Items. Source: JCHS tabulations of US Census Bureau, Housing Vacancy Surveys and Current Population Surveys. 27 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Student Loan Debt Burdens More Common, But Heavy Burdens are Concentrated in a Few Borrowers Percent with Debt Median Debt ($000s) Average Debt ($000s) Note: Debt amounts are constant 2010 dollars. Source: Joint Center tabulations of Survey of Consumer Finances. 28 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Minorities Account for Nearly Half of Younger Households and Much of the Coming Growth Age Under 30 29 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Substantial Gaps in Homeownership by Race and Ethnicity Remain After Two Decades of Ups and Downs Source: JCHS tabulations of US Census Bureau, Current Population Surveys. © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Renters Have Minimal Savings and Wealth So Need Low Downpayment Loans Cash Savings (Thousands of dollars) Total Net Wealth (Thousands of dollars) Notes: Data for Renters only. Cash savings includes checking, saving, CD and money market accounts. Source: JCHS tabulations of 2010 Survey of Consumer Finances. 31 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Median Credit Scores Vary by Race and Income, So Credit Score Cutoffs Also Matter Median credit score among all households, 2001 Source: Bostic, R., P. Calem and S. Wachter. (2003) Hitting the Wall: Credit as an Impediment to Homeownership, November 13, Working Draft. 32 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Housing Older Americans © PRESIDENT AND FELLOW S OF HARVARD COLLEGE The Older Population Is on Track to Increase Dramatically Population by Age Group (Millions) Source: US Census Bureau, Decennial Censuses and 2012 National Population Projections (middle series). 34 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Households Owning Their Homes Outright Are Much Less Likely to Be Cost Burdened Share of Households by Age Group (Percent) Source: JCHS tabulations of US Census Bureau, 2012 American Community Survey. 35 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Rapid Growth in Older Eligible Renters Will Put Even More Pressure on Housing Assistance Programs Very Low-Income Renter Households Aged 62 and Over (Millions) Sources: JCHS tabulations of US Department of Housing and Urban Development, Worst Case Needs Reports to Congress, and JCHS 2013 Household Projections. © PRESIDENT AND FELLOW S OF HARVARD COLLEGE By Age 80, Adults Are Far More Likely to Have Disabilities than to Live in Accessible Homes Shares of Housing Units and Population with Disabilities by Age Group (Percent) Source: JCHS tabulations of US Department of Housing and Urban Development, 2011 American Housing Survey, and US Census Bureau, 2012 American Community Survey. 37 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE Cost of Long-Term Services and Supports Are Quite High—Out of Reach for Most Renters Without Subsidies Median Monthly Cost Sources: 2014 Genworth Cost of Care Survey. 38 © PRESIDENT AND FELLOW S OF HARVARD COLLEGE