By Ben Abramson
As part of the largest generation in U.S. history, baby boomers have had an outsized influence in American business, politics, and entertainment. They’re about to do the same thing to the housing market. And the results won’t be pretty, for boomers or the housing market.
In a journal article called “The Great Senior Short Sale,” Arthur C. Nelson, professor emeritus at the University of Arizona, points to a potential doomsday scenario for some senior homeowners.
Many older Americans hold large, detached homes in car-dependent suburbs. Such homes do not easily support aging in place, plus many are governed by HOAs or zoning laws that prevent owners from even trying to adapt by building an accessory dwelling unit (ADU) for a caretaker, or having a large intergenerational household.
Millennial and Gen Z buyers have shown a clear preference for walkable, amenity-laden neighborhoods with smaller, attached dwellings. And all successive generations have been much smaller than the boomers.
Compounding the issue, many seniors have expressed an intention to downsize. So, not only will they be trying to unload the exact type of home many replacement buyers shun, they may end up competing with them for a limited number of desirable homes in walkable neighborhoods.
Even if the worst predictions for senior owners—failing to cash out of their existing homes and struggling to find suitable replacements—don’t materialize, the upcoming changes reflect a major misalignment in the real-estate market, and a direct challenge for North American municipalities.
Nelson’s study blends demographic and housing data to outline the problem. Among the statistics:
- There are 76 million boomers, compared with 54 million in Gen X and 67 million Gen Y/millennials. Between 1990 and 2010, boomer households with children were 82% of the market and 85% of new homes built were single-family detached.
- The ages when homebuyers need maximum space for their families are from 35 to 50. From 1980 to 2010, that demand was 75% of the housing demand. From 2010 to 2040, it will be 19%, while the percentage of households downsizing will be 77%. Because subsequent generations are smaller, the raw numbers mean we’ve already seen peak demand for large, detached houses.
- As of 2017, there were 62.9 million large lot houses; by 2038, the demand for them will be 44.8 million. Conversely, there are 22.9 million existing small lot homes, but a desire for 53.8 million by 2038, and attached houses are at 29.7 million, with demand projected at 52.3 million.
So, based on projected preferences and demand, Nelson’s analysis shows a drastic mismatch between the types of housing buyers will desire compared to existing inventory, and current construction trends won’t come close to bridging the gap.
There are more complicating factors. Many younger buyers have been squeezed out of the housing market by high prices, plus the more rigorous lending standards imposed after the 2008 collapse. Nelson also speculates that people who saw their families suffer in the ensuing recession may be less confident about pursuing homeownership.
One novel solution could include the number of unused bedrooms in American houses. The average detached house in the U.S. has 20% more bedrooms than people. People over 65 occupy 951 square feet per person, compared to 500 for people aged 25–34. Seniors could use those rooms to house caretakers or renters, or augment their income with in-house businesses, but again, zoning and HOA regulations forbid many of these uses.
Nelson’s study outlines a worst-case scenario for both senior homeowners and municipalities. Seniors who were expecting to reap major gains when they sell their homes will receive much less than they expected. The subsequent declines in property values will lead to a declining tax base. And places that have embraced the suburban development pattern, which Strong Towns has documented already face a fiscal time bomb in maintaining infrastructure, will have even fewer resources to do so.
The damage in this scenario would not be equal. Nelson maps out the jurisdictions most likely to face a senior selloff and exodus. Many are in Rust Belt and Southern counties that have single-family housing on large lots, where populations are already shrinking, and where outflow of younger residents increases the percentage of seniors while reducing the number of potential buyers. “Mature suburbs, cities that have diverse tax bases will not be hit nearly the same way as places reliant on residential property tax,” says Nelson.
Eric Kronberg, founder and principal of Atlanta-based Kronberg Urbanists + Architects, finds Nelson’s analysis compelling. “The senior selloff is unavoidable,” says Kronberg, but he thinks the overall housing crunch in the U.S. may blunt some of the blow for the senior homeowners.
“We’re seeing a significant lack of housing choices and housing supply across all scales and municipalities,” he observes of the Southeastern U.S., where he works.
Both Nelson and Kronberg argue that the solution involves building more of the types of housing that today’s and tomorrow’s buyers want. More multi-family structures. More attached dwellings. More ADUs. But too many of these missing-middle solutions are hamstrung by zoning laws, which often dictate suburban-style, single-family homes, even in urban cores.
The latest Foot Traffic Ahead report by Smart Growth America frames the problem starkly: “It is illegal to build walkable urban densities and mixed-use development on much of the 98.8% of land that is car-dependent due to restrictive zoning policies in most metropolitan areas.”
Nelson and Kronberg agree that it’s time for policymakers, especially at the local level, to address the issue. And neither have much confidence that will happen.
Local governments “don’t address fundamental needs of changing policies to meet current housing needs,” says Nelson.
“It’s questionable that local leadership has the wherewithal to stay the course and do the right stuff,” adds Kronberg.
Nelson favors state-level action, such as that in Oregon, which eliminated single-family zoning statewide, to “make local government be more flexible, and fight nimbyism.”
As with many crises, Kronberg speculates the solutions may come with money on the line. “We have so many jobs coming to Georgia and no housing and the state’s like, ‘oh s———, housing’s now a constraint to economic development.’”
This post was previously published on STRONGTOWNS.ORG and is republished under a Creative Commons license.
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