Trends in the U.S. housing market are inextricably tied to demographic trends in society at large. Demographic changes in the population cause changes in the number and types of households, and these household changes in turn lead to changes in the number and types of housing units demanded and supplied. To more fully understand the importance of demographic trends on the housing sector, HUD tapped the knowledge of experts in the area to share their views of the future. The result, Issue Papers on Demographic Trends Important to Housing, was commissioned and published by HUD, and the Urban Institute selected the expert authors and managed the preparation and editing of the reports.¹ This compendium contains an overview by Jennifer Johnson and Jessica Cigna along with three papers:²

• “Issue Paper on the Impact of Immigration for Housing,” by Barry Chiswick and Paul Miller.

• “Projections of U.S. Households by Race/Hispanic Origin, Age, Family Type, and Tenure to 2020: A Sensitivity Analysis,” by George S. Masnick and Zhu Xiao Di.

• “How Changes in the Nation’s Age and Household Structure Will Reshape Housing Demand in the 21st Century,” by Martha Farnsworth Riche.

These papers review past immigration patterns, illustrate how assumptions about future immigration can influence population predictions, and describe current and future trends in household age and minority compositions, respectively. These three papers suggest that the current demographic profile of the typical American household will change dramatically over the coming decades. The key characteristics that will influence future demographic growth and trends will be immigration, the aging of the population, the importance of minorities, the decreasing role of the traditional family, and longer life expectancies.

Chiswick and Miller draw the following conclusions from their review of the 1990 census data:

• Immigration will continue at a rate of about 1 million per year.

• About 10 percent of the U.S. population is foreign born.

• Immigrants are disproportionately urban dwellers (94 percent) living in central cities of metropolitan areas (40 percent).

• The distribution of immigrants varies by country of origin and is concentrated in a few states. Whereas nearly 60 percent of the Mexican immigrants live in California and only 1 percent live in New York, approximately 35 percent of Caribbean immigrants live in New York and only 4 percent live in California.

From their review and analysis of the data, Chiswick and Miller conclude that in the coming decades we can expect the following:

• Immigrants will make up an increasing share of the population as a result of continued high levels of immigration.

• Immigrants will become more common in areas of the country that have so far seen few immigrants, but the share of immigrants living in the six states with the highest presence of foreign-born people (California, Florida, Illinois, New Jersey, New York, and Texas) will continue to increase, and immigrants will increasingly spill over into neighboring states.

• Although immigrants will have an increased presence outside of metropolitan areas, the share of immigrants living within metropolitan areas will increase.

• The geographic concentration of immigrants living within metropolitan areas will change, with a smaller proportion living in the central city and a larger proportion living in suburbs and smaller cities in the metropolitan area.

• The dwelling units of immigrant families will increase in size, and a larger proportion of these families will live in detached houses rather than in apartments.

• The longer immigrants live in the United States, the more their housing patterns will resemble those of the native born.

Masnick and Di used the Potential Housing Demand projection model developed at Harvard University’s Joint Center for Housing Studies to prepare household and ownership projections for the next 25 years. The growth of minority households, the age distribution of different ethnic and racial groups, the expected high levels of immigration, and the differing rates of household formation are of particular importance in understanding the influence of demographic trends on housing. In their summary they highlight the following trends that emerge from their simulations and projections:

• Household growth between 2000 and 2020 should be approximately 23.8 million, with a low of 22.2 million and a high of 25.3 million, or approximately 1.1 to 1.3 million households per year.

• Minorities will contribute almost two-thirds of projected household growth (64 percent) over the next two decades, with Hispanics constituting 31 percent; African Americans, 20 percent; and other minorities (mostly Asians), 13 percent.

• Immigrants will contribute approximately 29 percent of the total projected household growth, with Hispanic immigrants accounting for 11 percent; Asian/other immigrants, 8 percent; white immigrants, nearly 6 percent; and African-American immigrants, 4 percent.

• Although immigration is an important component of minority household growth, another factor that elevates minority growth above that of whites is the younger age structure of the minority households. Because there are relatively few older minority households, the growth of younger minority households will not be offset by the dissolution of older households. Because a relatively large number of white households are headed by older people, members of these households become a negative force on net household growth over the next 20 years as they die.

• Whites will continue to dominate homeowner household growth as they have done in the past because the older age structure of White households favors them. However, minority owners are slowly but steadily gaining ground. Masnick and Di project that 22.3 million homeowner households will form during the first two decades of the 21st century, with 53 percent of these being non-Hispanic white households and 47 percent being minority. The share of minority homeowner households stood at 17 percent in 2000 and will reach almost 25 percent by 2020.

Riche notes that changing life expectancies, fertility rates, and the growth in minority populations will influence the housing sector in ways that will challenge housing professionals. The demographic context for America’s housing needs will change considerably during the first 25 years of the 21st century. However, although demographic trends push Americans in new directions, longstanding housing preferences will continue to shape their housing choices. This interaction between changing demographics and housing preferences will heighten the need for housing professionals to monitor evolving housing patterns and verify housing preferences so they can base policies on new realities rather than old assumptions:

• Because of the influx of younger immigrants, longer life expectancies, and improved health, the U.S. population will have roughly equal numbers of people in every age group rather than being dominated by the aging baby-boom generation. (In other words, the nation’s age picture will look more like a pillar than the classic pyramid.) Although the nation’s population continues to grow in all age groups, the largest growth is in the population that has completed child rearing.

• Household size is shrinking as married couples without children at home and single-person households each outnumber “traditional” family households. Among other things, this trend is undermining old assumptions about age-based choices of city versus suburban housing.

• The combination of longer life expectancies and the continuing preference for one or two children will make households without children more numerous. In 2000 the traditional family represented fewer than one in four households. With household growth concentrated in older age groups, the traditional family is projected to account for only one in five households in 2025.

Summary

The three issue papers and the overview present some ideas about what housing markets must be prepared for within the next several decades. Many of the standard ideas about family structure, childbearing, and lifestyles will be challenged by demographic trends:

• Majority households will more frequently be without children, smaller, and headed by an elderly person. Minority households, on the other hand, will be larger, consist of multiple generations, and be headed by younger individuals.

• Immigration has increased the number of minority households, and members of these households will continue to influence housing markets as they mature and create families. Homebuilders and lenders will need to adjust their business practices, products, and outreach methods to better serve this growing market sector.

• Immigration will have a disproportionate influence in metropolitan areas and in approximately six states. Providing opportunities for homeownership in these urban areas will require the cooperation of the housing industry, the primary and secondary mortgage markets, and HUD.

• Household formation is sensitive to economic conditions, and low-income people face more changes in employment and income opportunities. Therefore demographic trends must be considered to be contingent on economic conditions, and the housing market must be prepared for this uncertainty in the future.

Notes

1. A copy of this report can be downloaded from the PD&R Web site at https://www.huduser.gov/portal/publications/econdev/demographic_trends.html, and copies can be ordered from HUDUSER by mail at P.O. Box 23268, Washington, DC 20023–3268, or by phone at 800–245–2691.

2. This article draws heavily and directly from the three papers and the overview.