Peak Millennials and the Rental Crisis · 6/20/2016 9 Peak Millennial Births Annual Births in the U.S., 1960 to 2013 Source: National Vital Statistics Reports, Vol. 64, No. 1, Table

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Peak Millennialsand the Rental Crisis

Dowell Myers

New urban preferences of Millennialsor just a temporary presence?

The Questions

And why the rental crisis?

How can planners prepare for the future?

But why would it end??

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Basic Facts on the Millennial Generation

Born 1980 to 1999 (but many alternatives)

83 million is larger than the Baby Boomers

This is a generation, not an age group, but analysts currently focus on ages 20 to 34

Millennials are found everywhere, but their residence downtown and in close‐in areas gets the greatest attention

Dowell Myers, USCPrice

On

Urban Preferences

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“For me, car is king. Nothing will replace my car as my main mode of transportation” – who disagrees?

Under age 40 26%Over age 50 18% (NAR 2013:49)

When deciding where to live, “What’s important to me is living in a place at the center of it all.” – who agrees?

Under age 40 23%Over age 50 7% (NAR 2013:48)

From the National Assoc. of Realtors


Political Polarization of Preferred Community Types


Liberals Conservatives

Cities 46% 4%

Suburbs 21% 20%

Small town/rural 33% 76%

Total 100% 100%

Pew Research Center (2014: 45)

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The younger generation has stronger preferences for urban living,

but will it last when they grow older?

Yes there is some survey evidence….

.

But mainly we see “preference” based on urbanpresence and how their numbers are growing.

How strong was the contextual effect of the Great Recession?

Supposed preferences might be driven by limited opportunities, but those are now improving….

New Urban Preferences


On

Urban Presence

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Population growth by distance from city hall 1990-2000 and 2000-10, Ages 20 to 34, top 100 MSAs

Myers and Lee 2016

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

0 10 20 30 40 50 60 70 80

Po

pu

lati

on

Gro

wth

(%

)

Distance from City Hall (mi.)

1990-00 2000-10

1990-00: – 5.4%

Population growth by distance from city hall 1990-2000 and 2000-10, Ages 20 to 34, top 100 MSAs

Myers and Lee 2016

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

0 10 20 30 40 50 60 70 80

Po

pu

lati

on

Gro

wth

(%

)

Distance from City Hall (mi.)

1990-00 2000-10

1990-00: – 5.4%

2000-10: 6.4%

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The TheoryCohort Flow in the City

How Does the Number of MillennialsGrow in Cities?

Population level

In‐Flow

Out‐Flow

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Millennials are a set of cohorts born earlier and now flowing into adulthood

Society is age‐graded with expected rolesat each age and slots to be filled, including:

age appropriate housing unitsentry level jobs, etc.

These slots are turned over every year or twoto newcomers who are aging into position

and replacing the preceding cohorts when theymove on to the next life stage

Life Course Perspective


Inflow = Number of Eligible Candidates X Preference X Ability

Outflow = Number of Eligible Candidates X Preference X Ability

“Ability” represents the access to resources and opportunities.

“Preference” is desire, not just revealed location.

All of these components are changing, but preferences are least understood and so are not a solid basis for judging future outcomes.


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Three Reinforcing Cycles that Generate Millennial Impacts

Rise and fall of births 25 years earlier

Rise and fall of employment growth, 1990 to (projected) 2022

Progress through the housing lifecycle is blocked but then resumed (we expect)


TheBirthCycle

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Peak Millennial BirthsAnnual Births in the U.S., 1960 to 2013

Source: National Vital Statistics Reports, Vol. 64, No. 1, Table 1, January 15, 2015


4.2 M in 1990

0.0

1.0

2.0

3.0

4.0

5.0

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

U.S. B

irths (m

illions)

Year

32% greater than in 1976

Competition Faced by 25 Year‐olds

• Fighting for housing and entry‐level jobs

• Focused on their peers age 25 and four years older, i.e. all of the 25‐to‐29 age group


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TheEmploymentorBusinessCycle

–20.00

–15.00

–10.00

–5.00

0.00

5.00

10.00

15.00

20.00

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

5‐Year CumulativeChange in DemographicPressure

5‐Year % Job Growth

Demographic Congestion and Job GrowthComparison of 5‐Year % Job Growth and 5‐Year Cumulative Change in Demographic Pressure


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TheHousingLife‐Cycle

Housing Life Cycle Progression

Percent of People Who Are Living inEach HousingCircumstance


0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

15‐19

20‐24

25‐29

30‐34

35‐39

40‐44

45‐49

50‐54

55‐59

60‐64

65‐69

70‐74

75‐79

80‐84

85+

Per100persons

Age

Renter Heads

Owner Heads

Spouse/Partner of Head

With Roommates, Parents, or inGroup Quarters

Data for US — ACS 2014

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How Does Housing Opportunity Grow?

• New construction of housing units

• Vacancies from more turnover of existing units


Housing Unit Construction in the U.S., Total and Multifamily, 1970–2014 (1000s)


0

500

1,000

1,500

2,000

2,500

(Number of Units in Thousands)

All Completions MF Completions

Source: U.S. Census Bureau, Survey of Construction.Note: The recession‐and‐recovery period (2008‐2012) is highlighted red.

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What Happens in a Housing Shortage?

• Would‐be home buyers become renters

• Millennials keep arriving and Existing Renters get sandwiched betweenthem and the diverted homeowners

• Developers slowly try to build new supply

• Desperate home seekers scavenge and over pay, double up, or disappear


Cascade of Diverted & Growing Households in Los Angeles County

Would‐be homeownerswere diverted into rentals

314,000

Joining the expected growth of renters from Millennials & others 212,000

Creating Total POTENTIAL growth in renters ……………… 526,000

Changes 2006 to 2014, Actual Population, but Assuming 2000 Patterns of Housing Occupancy


Analysis by JungHo Park

Based on Myers, Painter, Lee and Park (2016)

How well was this rental demand met by new supply?

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When Growing Rental Demand Meets Limited Housing Supply

ACTUAL lncrease in renter‐occupied units …………… 177,000

Construction of Multifamily81,931 units permitted

Conversion of Single‐Family to Rental30,000 units approximately

LEAVES displaced renters………… 353,000( 9.8% of 2014 expected households)

Changes 2006 to 2014 in LA County


Total POTENTIAL growth in renters ………………………………… 526,000

New Supply

To be housed in

Less the

Analysis by JungHo Park

Conversion to Additional UnitsNot known how many units

Net Result for Millennials

• Slowed down, backed up into parents’ homes, and bottled up in singles areas

• But Millennials over age 25 or 30 are breaking out and looking for better housing where they can find it

• That includes gentrifying housing close to singles districts


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Conclusion

Is this a New Era for Millennials?

Freed from Housing Gridlock

The 3 cycles once were harmonized to maximize urban residence (from 2005 to 2015).

But the 3 cycles now are pulling together in the opposite direction (from 2015 to 2025).

.

The larger Millennial cohorts would have created a more competitive environment for entry‐level jobs even in a strong economy, but in the Great Recession

the opportunities were doubly limited.Now the opportunities are finally beginning to grow.

And housing opportunities are also beginning to resume, so the Millennials are free to finally move

where they like.

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Articles Referenced in the Presentation

Dowell Myers, "Peak Millennials: Three Reinforcing Cycles That Amplify the Rise and Fall of Urban Concentration by Millennials," Housing Policy Debate, April/May 2016: http://www.tandfonline.com/doi/full/10.1080/10511482.2016.1165722.

Dowell Myers, Gary Painter, Hyojung Lee, and JungHo Park, ”Diverted Homeowners, the Rental Crisis, and Foregone Household Formation,” Special Report, Research Institute For Housing America, Mortgage Bankers Association, Washington, D.C., April 2016.

Thank you

Dowell Myers

USC PopDynamics

The future remains to be determined……

Documents

Peak Millennials and the Rental Crisis · 6/20/2016 9 Peak Millennial Births Annual Births in the U.S., 1960 to 2013 Source: National Vital Statistics Reports, Vol. 64, No. 1, Table