Renting the American Dream
Home ownership is a well-entrenched component of the American dream. But, that may well be changing, according to a major survey released earlier this month from the MacArthur Foundation.
For a majority of Americans today, renting is a viable path to achieving their version of the American dream, the study finds.
The report [PDF], entitled How Housing Matters: Americans' Attitudes Transformed By The Housing Crisis & Changing Lifestyles, was carried out for the foundation by Hart Research Associates. It is based on telephone interviews with 1,433 adults conducted between February 27 and March 10 of this year as well as focus groups conducted in various cities.
Overall, a majority of Americans, including seven in 10 renters, say they aspire to own their own home someday. But more than half (57 percent) believe that "buying has become less appealing," while 54 percent believe that "renting has become more appealing." Almost half of current home owners (45 percent) can see themselves renting at some point in the future. And, the rate increases alongside income and education, with 48 percent of college-educated home owners, 53 percent of home owners with a post-graduate education, and 51 percent of home owners with household incomes greater than $75,000 saying they would consider renting.
Numerous studies have argued that home ownership stymies the flexibility of the labor market and the economy by tying home owners to their location and making it harder for them to pick and move to jobs and economic opportunity. Three-quarters of survey respondents believe that "moving to a new city or state for a job is more likely now than it was in the past," the report finds.
A majority of Americans also say home ownership has lost its economic allure as an investment for the future. Nearly seven in 10 Americans (69 percent) report that "it is less likely for families to build equity and wealth through homeownership today compared with two or three decades ago." Most of all, three in five adults (61 percent) believe that "renters can be just as successful as homeowners in achieving the American Dream." This sentiment was felt among more than half of home owners (59 percent) and more than two-thirds (67 percent) of renters.
The chart below, from the report, provides an interesting snapshot of American's changing views on renting versus owning.
American housing policy has favored home owners for some time (providing tax and other benefits for home ownership). As the report points out: "While roughly 35 percent of Americans rent and the other 65 percent own, the federal government spends approximately three times as much to support homeownership as it does to support renting."
Americans are in favor of a more balanced approach to housing policy, according to the study. "After hearing information about U.S. housing policy and demographic and lifestyle changes, more than three in five self-identified Democrats (69 percent), independents (65 percent), and Republicans (62 percent), believe that the focus of our housing policy should be divided fairly equally between rental housing and housing for people to own," the study finds.
Peter Hart of Hart Research Associates summarizes the central findings of the study in a press release this way:
While the desire to own a home remains a bedrock principle in American life, this survey demonstrates that the American public's views about housing are changing, in part due to the hangover from the housing crisis, but importantly, also because of changes in our lifestyles. The dynamic is no longer simply 'renting versus owning' – perspectives are more complex, and people are viewing housing in a more holistic way. ...Many of the positive attributes that have long been associated with homeownership are fading, and on the flip side of the coin, it is remarkable that nearly half of all homeowners can picture themselves one day becoming a renter.
America's home ownership rate has declined from a peak of nearly 70 percent before the crash to roughly 65 percent today, according to the U.S. Census. The share of renters has jumped slightly from 34.1 in 2009 to 35.4 percent in 2011, according to Census figures. Gallup surveys suggest an even greater increase in renting, with the share of renter households increasing from 22 percent to 34 percent between 2006 and today. And the rate of home ownership among younger Americans has declined at substantially faster clip, dropping from around 43 percent before the crash to roughly 37 percent today, a trend The Atlantic's Derek Thompson has also pointed out. Projections by the Urban Land Institute suggest the home ownership rate may fall back to as low as 60 percent over the course of the coming next decade.
The map above from a recent U.S. Census Bureau report [PDF] charts the change in the share of households that rent across all 366 U.S. metros between 2009 and 2011. The share of households that rent increased in a quarter of metros (88), and remained unchanged in three-quarters, while declining in just nine metros, or 2.5 percent.
The shift toward renting was substantially more pronounced in the nation's 50 largest metros (those with more than one million people). The share of households that rent increased in 70 percent of these metros (rising in 35 and remaining unchanged in 15 of them; none of these metros saw a decline in the share of households that rent). The metros with the highest share of households that rent in 2011 were Los Angeles (50.1 percent), New York (48.9 percent), San Diego (46.7 percent), Las Vegas (46.4 percent), San Francisco (46.3 percent), Austin (43.3 percent), and San Jose and the Silicon Valley (43.1 percent), according to the Census figures.
This shift in the American Dream away from home ownership to renting may portend good things for the economy broadly. While a high rate of home ownership may have spurred the old industrial economy, my analysis (published here on Cities about a year ago) finds little connection between the rate of home ownership and the innovativeness, productivity, or economic growth of metros today. In fact, metros with rates of home ownership in excess of 70 percent had relatively low levels of innovation, wages, incomes, and economic activity, while those with home ownership rates of 55 to 60 percent had healthier economies, higher rates of innovation, and higher incomes. The higher level of rental housing in these metros contributes to their flexibility and economic dynamism.
Let me be clear on where I stand: I am not arguing that America will or should shift from a nation of owners to a nation of renters. My main point is that tilting the home ownership rate back from its high of 70 percent to say 55 or 60 percent — not too far from where the U.S. is at today — would seem to be line in with greater labor market flexibility and economic dynamism.
As I've argued:
A 'home of one's own' has been the emblem of prosperity and stability for a very long time. The idea is rich with psychological and cultural significance, but we have come to an economic juncture where we must re-examine even our most cherished beliefs. We can begin by updating our definition of the American Dream.
On the evidence of this survey, we appear to be doing just that.