Tuesday, December 16, 2014

How will housing markets and policies respond to the “diversity explosion”?

by Lisa Sturtevant, PhD, National Housing Conference

William Frey of the Brookings Institution has written a new book titled Diversity Explosion. An intentionally provocative title for a book about seismic demographic shifts in the U.S., the book formed the basis for a presentation and panel discussion I attended on Monday. Diversity Explosion describes the important demographic trends that will shape the future of politics, policymaking and economic growth in the country over the next four decades. The way in which the demographics of the country are changing will have important implications for future housing demand and housing policy. Three key findings from the book and their effects on housing needs are discussed below.

The U.S. population will turn majority minority between 2040 and 2050. The shift to a majority minority population is a key message from Freys book. Regardless of the U.S.s immigration policy, the country will become increasingly diverse over the coming decades, and by 2044 we are expected to be a nation where no one racial or ethnic group accounts for a majority of the population. The increase in the minority population is largely due to the fact that minorities in the U.S. tend to be younger and more likely to be in childbearing ages than the white population. At the same time, the white population is growing very slowly and, in fact, is projected to begin to decline in actual numbers in coming decades.

Minorities, therefore, will drive household growth in the future. And while they do and will have a diverse set of housing preferences and needs, minority householdsoverall housing demand patterns look different from those of whites. Minority households are less likely to be homeowners than white households. In addition, the rates of homeownership among minorities declined faster during the housing downturn than they did for whites. Lower and declining homeownership rates are strongly related to the growing wealth disparities between minorities and whites.

Because the primary means by which the middle class builds wealth in the U.S. has been through homeownership, public policy related to the accessibility and affordability of homeownership will be critical as the nation becomes more diverse. So, too, will the pace of rental construction activity and policies that either promote or slow the production of affordable rental housing.

The aging of the white population highlights the divergent preferences between minorities and white. The age structures of whites and minorities in the U.S. are starkly different. According to the 2010 Census, the median age of non-Hispanic whites was 42. The median age of Asians was 35, the median age of African Americans was 32 and the median age for Hispanics was 27. Thus, the minority population in the U.S. is much younger than the white population.

Dependency ratios are one way to measure the age structure of populations. Dependency ratios are defined as the total non-working age population divided by the total working age population. The “old age” dependency ratio uses the number of seniors in the population as the numerator of the ratio; the “child” dependency ratio uses the population under age 18. The child dependency ratio is higher in the minority population compared to that in the white population; the old age dependency ratio is much higher for whites than for minorities and is rising quickly among the white population. This disparity in dependency ratios can lead to competition for public resources that can increasingly pit older whites against younger minorities. While the white population may increasingly advocate for more resources for seniors, minorities will see a greater need for public investment in children and young adults.

This struggle will play out in the demand for limited affordable housing resources. There may be pressure from whites for programs that give preferences to seniors, while the growing minority population may call for additional housing support for families with children. Policies that spell out how housing resources should be allocated—or who should be given preference for housing subsidies—will need to be drafted to recognize the growing divide in priorities between the shrinking white and the growing minority population.

Minorities have been moving more frequently to the suburbs. According to the 2010 Census data tabulated by Frey, for the first time, a greater share of African Americans lived in the suburbs of the nations largest metro areas than in the central cities. Growth in the suburban Hispanic and Asian populations has also been dramatic. In the Monday discussion, Frey commented on some of the positive implications of the suburbanization trend, specifically the possibility that minorities moving to the suburbs were able to access better education, employment and other opportunities than they were able to in the cities. But he cautioned that the suburban migration has not been uniform among all types of minority households. Specifically, minority households that are two-parent families with children have been more likely than single parents to have moved from cities to suburbs. And the panel did not dwell on the less positive issues around increased minority suburbanization, including gentrification of central cities that has priced out some minority households, and challenges associated with rising suburban poverty.

The increase in the number of minority households in the suburbs suggests a need for local housing policies that are designed purposefully to build inclusive and integrated communities. HUDs proposed affirmatively furthering fair housing rule, designed to better implement the obligations specified by the National Housing Act and to improve neighborhoods and housing opportunities for all, is an important step to help suburban communities recognize and address their diverse and changing housing needs. Local strategies like inclusionary housing with on-site (or near-site) affordability requirements can be effective tools to increase inclusivity.

As William Frey has made clear, demographic change is reshaping the population of the U.S. and the racial and ethnic make-up of cities and states across the country will look dramatically different in 2050. The trends outlined in Diversity Explosion are clear—we know where we are headed—so it is now incumbent upon the policymakers, developers and advocates to come together to plan for ways to meet the housing needs of our diversifying population.

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