Improving Housing Policy for Seniors, People of Color

Researchers at Urban Institute frequently pen papers about homeownership as a wealth-building tool. This week the VP of Housing Finance Policy Laurie Goodman examines the future of household growth, headship rate (the share of adults who are the heads of households), and the homeownership rate (the share of household heads who own their homes) through 2040.

"To create a more equitable and sustainable housing landscape, policymakers, thought leaders, and changemakers need to understand the trajectory of the homeownership rate—where it has been, where it is going, who it has benefitted, and who it has left behind," Goodman explained.

To get a grasp on this trajectory, Goodman and associates analyzed household formation and homeownership over time, showing how a combination of economic cycles and public policies have widened racial homeownership gaps.

A few of the key findings are listed below. See the full report at urban.org/research.

• Household growth will be weak over the next two decades. Household growth averaged 12.4 million per decade from 1990-2010, 7.3 million from 2010-2020 and, we project 8.5 million from 2020-2030 and 7.6 million from 2030-2040"—the decline is a result of slowing population growth and lower headship rates for most age groups.
• All net household growth will be from households of color. Between 2020 and 2040, there will be 16.1 million net new households. Hispanic households will grow by 8.6 million, households of other races (mostly Asian households) will grow by 4.8 million, and Black households will grow by 3.4 million. White households will decline by 0.6 million."
• Almost all net household growth will be from senior households.
• The homeownership rate will continue to fall for every age group.
• The decline in the homeownership rate will be particularly pronounced for Black households headed by 45-to 74-year-olds. If current policies stay the same, the Black homeownership rate will fall well below the rate of previous generations at the same age and result in an unprecedented number of Black renters over 65; we project elderly Black renters will more than double from 1.3 million in 2020 to 2.6 million in 2040.
• "Net growth in the number of homeowners from 2020 to 2040 will be entirely among people of color, especially Hispanic homeowners. Between 2020 and 2040, there will be 6.9 million net new homeowner households, a 9% increase. Hispanic homeowners will grow by 4.8 million, homeowners of other races (mostly Asian homeowners) will grow by 2.7 million, and Black homeowners will grow by 1.2 million. The total number of white homeowners will decline by 1.8 million."
• Renter growth will be more than twice the pace of homeowner growth from 2020 to 2040. 

Armed with understanding, policymakers should focus on policies that address seniors' specific needs, Goodman says, and should prepare for the surge in renters and coming demographic changes, we need to increase the supply of affordable homes and better tailor these homes to the needs of future owners and renters through more flexible zoning and land use regulations.

In addition, leaders must also make a concerted effort to decrease the enormous racial homeownership gap by improving and expanding financial education and homeownership preparation and increasing the visibility, access, and types of down payment assistance programs; re-examine how financial institutions qualify borrowers for mortgages and revamp the process to more precisely assess creditworthiness; and implement programs that sustain homeownership for borrowers with less wealth, especially people of color.