Homeownership is a critical wealth-building tool, but not everyone has the same opportunities to become a homeowner. 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 benefited, and who it has left behind.
To better understand this trajectory, we look at household formation and homeownership in the US over time, showing how a combination of economic cycles and public policies have widened racial homeownership gaps. We also project the future 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.
Our analysis reveals several key findings:
- 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 to 2020, and we project 8.5 million from 2020 to 2030 and 7.6 million from 2030 to 2040. This decline is the result of slowing US 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. Of the 16.1 million net new households formed between 2020 and 2040, 13.8 million will be headed by someone over 65.
- The homeownership rate will continue to fall for every age group. People who were 25 to 44 years old in 2010 are the most affected age group, as the Great Financial Crisis hindered their ability to become or remain owners. The aging of the US population will cushion the drop in the overall homeownership rate because older households have higher homeownership rates. We project the overall homeownership rate will fall from 65 percent in 2020 to 62 percent by 2040.
- 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 percent 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. Between 2020 and 2040, there will be 9.3 million net new renter households, a 21 percent increase. Hispanic renters will grow by 3.8 million, Black renters by 2.2 million, renters of other unspecified races (including Asian renters) by 2.1 million, and white renters by 1.2 million.
These findings have important implications for policies and practices:
- To support the large number of senior households, we need to urgently focus on developing and implementing policies that address their specific needs.
- To 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.
- To decrease the enormous racial homeownership gap, we need to take concerted action to
- improve and expand financial education and homeownership preparation and increase the visibility, access, and types of down payment assistance programs;
- reexamine how we 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.