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Harvard: Immigrant communities will save American homeownership

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Although U.S. homeownership rates rebounded in the early days of the pandemic, weakening affordability, inadequate inventory, lagging household formation, slowing population growth and a scary financial outlook for the nation’s youngest generations paint a bleak picture for the future of American homeownership.

However, the Harvard Joint Center for Housing Studies’ annual 52-page “State of the Nation’s Housing” report laid out how immigrant-led households could hold the key to sustaining the nation’s homeownership rate, as this demographic accounts for a sizable share of recent population growth and household formation gains.

“Immigrants constitute an extremely racially and economically diverse demographic,” the 2023 State of the Nation’s Housing report read. “In 2022, immigration was the largest source of population growth for 26 states and nearly a third (29 percent) of all counties and has helped stabilize declining populations in both small rural counties and large urban counties experiencing net domestic outmigration of native-born residents.”

Despite strong growth in U.S. household formation from 2017 to 2022, Harvard researchers said the end of early-pandemic financial measures including federal stimulus checks and a student-loan payment moratorium will harm household formation in the coming years as young Americans who couldn’t seize 2020 and 2021’s interest rate drop find themselves locked out of the market.

“The household growth rate in 2022 represents a slowdown from the 2.0 million annual average between 2019 and 2021, and likely signals that the recent surge is waning,” the report said. “Likewise, the share of young adults who head their own households—also called the headship rate—has recovered much of the ground lost in the decade following the Great Recession, indicating that there is little room for these rates to rise higher.”

Harvard researchers said household formation and population growth are intertwined, as evidenced by the U.S.’s population growing 0.38 percent year over year from 2021 to 2022 — a precipitous fall from the early 2000s when annual population growth neared 1 percent.

“While this represents a slight uptick from previous years — population growth hit 100-year lows in 2019 and again in both 2020 and 2021 — it is nevertheless a meager growth rate when compared with the 2.8 million annual average (0.94 percent) in the 2000s,” the report read. “In fact, if not for the 0.35 percent rate of growth in 2020 and the 0.16 percent growth rate in 2021, the 2022 growth rate would have marked a new 100-year low.”

The outlook for population growth (i.e. the net of births minus deaths) from native-born residents isn’t expected to improve, as deaths of this demographic are expected to begin outpacing births as early as 2043. At that point, researchers said “population growth will rely entirely upon immigration.”

The report said anti-immigrant policy changes and an increasingly volatile global economic outlook mean the future of U.S. immigration is “unpredictable.” Even so, immigrant communities are the best chance the U.S. has to continue growing and thriving as they, on the whole, are more educated and more mobile than native-born residents.

The latest U.S. Census Bureau data shows immigrants represent 33 percent of households in California, 27 percent of households in New Jersey, and 21 percent of households in Texas. Immigrants lead 48 percent of households in the Miami metro, 40 percent of households in the Los Angeles metro area, and 35 percent of households in the New York City metro.

“Immigrants constitute an extremely racially and economically diverse demographic,” the report read. “Among recent immigrants who have entered the country since 2016, 20 percent of foreign-born adults ages 25 and older lack a high school education, in contrast to 7 percent of native-born adults. However, 47 percent of immigrants have a bachelor’s degree or higher, compared with just 35 percent of native-born adults.”

“Unsurprisingly, immigrants with more skills and education generally earn higher incomes and are better positioned to form new households, buy homes, and afford different areas than their counterparts with less income, illustrating the need for more diverse housing options to meet the full range of housing demand from immigrants,” it added. “As a significant driver of household growth, immigrants are a large source of new housing demand.”

The report’s researchers said the housing industry must catch up with demographic shifts, which call for more accessible housing for an aging population, a boost in housing inventory for all income levels, and a stronger dedication to fair housing rights as the U.S. becomes more diverse.

“It is clear that the aging and growing diversity of the population, coupled with some workers’ increasingly flexible work options, will change the shape of housing demand and necessitate housing adaptations,” the report read. “These include additional options for older households seeking to remain in their communities and homes in a broad range of communities and at a broad range of price points for a diverse array of households of all ages, races, and income groups.”

It concluded, “Further, in the face of persistent and growing racial wealth and income disparities, the need for safe, affordable housing for households with lower incomes and households of color is ever more urgent.”

Read the full report below:

Email Marian McPherson