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On the Future of Housing Two sweeping changes are in store for the housing market over the next 15 years— a surging rental market and a decrease in the home ownership rate, except for those who are older than age 75. Policy changes will be critical for addressing both. What the Data Shows By 2030, the home ownership rate is expected to drop to 61.3 percent (from 65.1 percent in 2010 and down from its peak of 69.2 percent in 2004), as more renter households are formed, according to Urban Institute’s 2015 research report, “Headship and Home Ownership: What Does the Future Hold.” California has steadily been seeing its home ownership rate decline, reaching 54.9 percent in 2014. “When you look at the downward trends in home ownership, there are a lot of factors,” Goodman described. She points to factors like the growing share of minorities in the population who traditionally have lower home ownership rates; the tightening of credit availability; the still-lingering shadows of the foreclosure crisis and recession; as well as the delayed marriage rates and apparent shift in attitude about home ownership among Millennials (e.g., by the time Millennials reach their prime home-buying age in 2030, only 38 percent are expected to own homes, well below the 46 percent of baby boomers in the 1990s). ship has traditionally represented their main avenue of wealth accumulation,” Goodman said. “But people of almost all age groups are changing their behavior and economic realities are making it more difficult to save for a down payment and to qualify for a mortgage to become a homeowner, resulting in higher numbers choosing renting over owning.” The Challenge Ahead Many owners continue to be shut out of the market due to tight credit standards, but that comes at a time when housing is still relatively a good buy by historical standards. Housing is considered “slightly undervalued” nation- wide—more affordable now than compared to the 2000 to 2003 period. That is mostly attributed to low mortgage rates. Even if interest rates rose to 6 percent (they’re cur- rently at about 4 percent), affordability will fall back in line with 2000 to 2003 levels, considered a relatively stable period for housing prices, Goodman notes. (Of course, California holds some pockets of exception due to high demand areas where prices have soared.) “For most people, home owner- Policy Recommendations Policy changes that set out to expand credit access can help draw more people to home ownership in the coming decade. Sure, “there are many households that will never buy and that proportion is growing, and many who lost their homes in the foreclosure crisis have no desire to buy again, even if financially they are able to do so,” Goodman suggested. That said, “by expanding access to credit and programs to support rental housing construc- tion, focusing on the needs of senior renters and addressing underlying income and wealth challenges we’ll have a healthier hous- ing market for renters and owners by 2030.” GILROY • MORGAN HILL • SAN MARTIN JULY / AUGUST 2016 By Roger Cruzen, C.A.R. Magazine 23