Housing report

JCHS Releases State of the Nation’s Housing Report

the Harvard University Joint Center for Housing Studies published the 2021 edition of its report on the issues surrounding housing in the United States. The report brings together data from a wide variety of sources to shed light on where the housing market is and how it got there.

Covering all the bases

The 38-page report covers all aspects of the housing market and the forces shaping it, including the economy, demographics and government policy. This article discusses key insights in the sections of the report that apply to the rental housing sector of the housing market.

The change of tenant

It has been widely documented that many tenants have fled the urban cores of major metros in response to the pandemic and the closures that have been imposed in response. This has led to speculation about how long it will take for occupancy and rents in the urban core to recover. Two factors commonly cited as the cause of the loss of tenants in the urban core are the return of young people to their parents and companies allowing employees to work from home. This last factor makes commuting less important, freeing up employees to look for cheaper accommodation in areas farther from the office. The information in the report implies that both of these factors may be short-lived.

The report presents data on the phenomenon of young adults returning to their parents in response to the pandemic. It is summarized in the first graph below. The graph shows that the proportion of young adults living with their parents generally increases around May and decreases around September. However, in 2020, the proportion of young people living with their parents started to increase in March after the outbreak of the pandemic. It peaked at around 40% during the summer, about 5 percentage points higher than in previous summers. However, by March 2021, the share of young adults living at home had fallen to the point that it was only about 2 percentage points higher than in 2018 or 2019. The fact that the living conditions of young adults have almost returned to their pre-pandemic state indicates that rental terms may also return to their pre-pandemic state.

Source: US Census Bureau JCHS tables, Current Population Survey via IPUMS CPS, University of Minnesota, www.ipums.org.

Regarding remote working, the report states: “A PricewaterhouseCoopers survey from January 2021 shows that more than half of employees (55%) would like to work remotely at least three days a week, but only a quarter of executives expected to what many or all office workers work. home for a significant portion of the work week after the pandemic is over. If many, if not most, companies call their employees back to the office, this will encourage them to come back closer to their employer. This, along with the reopening of downtown bars, restaurants, theaters and other attractions, could attract the young adult population to the urban core sooner rather than later.

Location mismatch

The report presents information on where housing is being built and where the growth in the number of households is occurring. It does this by breaking the data down by county and categorizing counties as being large metropolitan center, large non-central metro (suburbs), other (small) metropolitan and non-metro areas. In recent years, large non-central metropolitan areas have accounted for about 40% of household growth. Small metros accounted for about 33% of household growth, with large metropolitan centers accounting for about 20%. Permit issuance locations for single-family homes correspond roughly to this distribution.

By contrast, about half of multi-family housing permits have been issued for major metropolitan counties in the past three years. Only about 20% of multi-family permits were issued for large non-central metropolitan areas. This is quite different from the place model where household growth occurs.

Put together

The report also discussed rental housing market insights that will be familiar to Yield Pro readers. He quoted the Census Bureau Pulse Survey indicating that fewer tenants have recently reported being behind on their rent than at the start of the pandemic. He cited rent data that indicated rents were still falling in major metros, but are now picking up across the country. He reported that rental property prices have remained high during the pandemic. He was talking about the rising prices of building materials and the challenges that come with it. The report also talks about the impact of the pandemic on multi-family housing construction volumes.

The State of the Nation’s Housing Report is a touchstone for the industry. It does a valuable service by bringing together information from various sources in one place. It is worth reading and is available here.