The State of the Union’s Housing in 2016

photo by Lawrence Jackson

The Joint Center for Housing Studies of Harvard University has released its excellent annual report, The State of the Nation’s Housing for 2016. It finds,

With household growth finally picking up, housing should help boost the economy. Although homeownership rates are still falling, the bottom may be in sight as the lingering effects of the housing crash continue to dissipate. Meanwhile, rental demand is driving the housing recovery, and tight markets have added to already pressing affordability challenges. Local governments are working to develop new revenue sources to expand the affordable housing supply, but without greater federal assistance, these efforts will fall far short of need. (1)

Its specific findings include,

  • nominal home prices were back within 6 percent of their previous peak in early 2016, although still down nearly 20 percent in real terms. The uptick in nominal prices helped to reduce the number of homeowners underwater on their mortgages from 12.1 million at the end of 2011 to 4.3 million at the end of 2015. Delinquency rates also receded, with the share of loans entering foreclosure down sharply as well. (1)
  • The US homeownership rate has tumbled to its lowest level in nearly a half-century. . . . But a closer look at the forces driving this trend suggests that the weakness in homeownership should moderate over the next few years. (2)
  • The rental market continues to drive the housing recovery, with over 36 percent of US households opting to rent in 2015—the largest share since the late 1960s. Indeed, the number of renters increased by 9 million over the past decade, the largest 10-year gain on record. Rental demand has risen across all age groups, income levels, and household types, with large increases among older renters and families with children. (3)

There is a lot more of value in the report, but I will leave it to readers to locate what is relevant to their own interests in the housing industry.

I would be remiss, though, in not reiterating my criticism of this annual report: it fails to adequately disclose who funded it. The acknowledgments page says that principal funding for it comes from the Center’s Policy Advisory Board, but it does not list the members of the board.

Most such reports have greater transparency about funders, but the interested reader of this report would need to search the Center’s website for information about its funders. And there, the reader would see that the board is made up of many representatives of real estate companies including housing finance giants, Fannie Mae and Freddie Mac; national developers, like Hovnanian Enterprises and KB Homes; and major construction suppliers, such as Marvin Windows and Doors and Kohler. Nothing wrong with that, but disclosure of such ties is now to be expected from think tanks and academic centers.  The Joint Center for Housing Studies should follow suit.

America’s Rental Housing

Shahnaz Maqbool

Harvard Kennedy School Littauer Building

The Joint Center for Housing Studies of Harvard University has issued America’s Rental Housing: Expanding Options for Diverse and Growing Demand. The report concludes,

The need for rental housing that low- and moderate-income households can afford is already great and growing. Although multifamily construction is booming, most new rentals are targeted to the high end of the market. And with the huge millennial population poised to enter the housing market, the pressure on rents will only increase.

The strained political climate and caps on nondefense discretionary spending have held down appropriations for federal rental assistance programs. Recognizing these limitations, the federal government has made new efforts to integrate affordable housing, healthcare, and supportive services for the most vulnerable households, including the working poor and older adults with chronic health conditions and disabilities.

There is broad recognition that neighborhood quality directly shapes the economic opportunities available to low-income renters. Indeed, increasing the access to communities with good-quality schools, low crime rates, and proximity to employment and transit can result in better economic outcomes for both parents and children. Improvements to existing rental assistance programs would help more low-income households find homes in a broader range of neighborhoods. At the same time, however, developing new rental housing in disadvantaged communities can be an important means for fostering neighborhood revitalization.

Each of these policy issues deserves attention and debate. While specific solutions vary across markets, the ultimate goal must be to ensure that the nation’s rental housing stock meets the needs of the diverse renter population and that America’s communities are inclusive of all households. (36)

These conclusions are most certainly correct, although they may not be giving the process of filtering its full due. If there were to be a dramatic increase in the total supply of housing, it would lower its average cost, all other things being equal.

I must conclude this post with my constant refrain about the Joint Center’s publications: they fail to adequately disclose their funders. Readers would want to know that the funders for this publication include lots of companies that stand to benefit from an increase in production in multifamily housing, such as builders, construction supply companies and financial institutions.