Homeownership Rate a Growing Concern
Photo: “ANDP and its partners welcome a new homeowner to Atlanta’s historic Pittsburgh neighborhood.”
The Joint Center for Housing Studies of Harvard University has recently released its State of the Nation’s Housing 2017 report detailing the impact of a long-term decline in the nation’s homeownership rate. The downward trend is disproportionally impacting black households in Atlanta and beyond.
“Over the past 12 years, the black homeownership rate fell sharply to just 42.2 percent, slightly below the 1994 level (Figure 4). With white rates increasing to 71.9 percent over this period, the black-white homeownership gap widened by 2.3 percentage points to 29.7 percentage points in 2016—the largest disparity since World War II.” – JCHS State of the Nation’s Housing
Critical factors impacting homeownership rates are lingering negative equity in hard hit neighborhoods, access to mortgage credit, and the availability of new or existing homes affordable to low- and moderate-income homebuyers.
ANDP is tracking more than 40 metro zip codes that have negative equity rates much higher than the national average. Homeowners in these communities owe more on their mortgages than the homes are valued on the market – leaving them trapped without wealth-building equity. South metro Atlanta has an average negative equity rate of 25.5 percent, compared to a national average of 10.5 percent. North metro Atlanta has an average rate of 8 percent, well below the national average.
Availability of affordably priced homes is a concern in both new and existing home markets. The JCHS report notes that nationally, only 1.65 million existing homes were for sale in 2016, the lowest level in 16 years. This represented approximately a 3.6-month supply, which is an 11-year low. From 2004 to 2015, construction of smaller single-family homes (under 1,800 square feet) fell from nearly 500,000 homes to less than 140,000. Unfortunately, the reduced production of affordable single-family homes is not being offset by multifamily construction, as the bulk of new apartments are aimed at the luxury market.
A combination of market forces has generated a boom in the rental market. The upward pressure in the high-end rental market and strong demand is pushing up rents across the board. These forces result in many renters being moderately (paying more than 30 percent of income on rent) or severely cost burdened (paying more than 50 percent of income on rent). In fact, among metro Atlanta renters in 2015, 22.5 percent were cost burdened and 25.3 percent were severely cost burdened. With nearly one in two rental metro Atlanta households struggling to pay rent, the prospects for increasing homeownership rates is greatly diminished.
While homeownership may not be the right path for every household, for those who are ready, it provides critically important benefits. Homeownership can lift families out of the cycle of poverty, help stabilize neighborhoods, and create greater civic participation.