Monday, November 2, 2009

Changes in Demographics Affect Housing Demand

Josh Martin, urban planning dynamo of South Carolina's Coastal Conservation League, circulated an informative article today:  Arthur C. Nelson, "Demographic Outlook," Urban Land (Sept. 2009).  The article predicts that the United States will experience an unprecedented shift in demographics between 2005 and 2030, one that will affect housing markets in significant ways, especially in the area of multifamily housing.  Increasing numbers of seniors and single-person households without children will dominate.  Minority household growth will nearly triple that of white, or non-Hispanic, households.  In other words, households as we move toward 2030 will become older and more racially diverse.  In fact, the age group 65+ will experience a 96.6% increase--45.5% of the overall share of change.  At the same time, seniors share an affinity for the same type of housing as the second-largest share of the growth:  the single-person household in the 25-35-year old range.  What kind of housing do they favor?  Smaller units in mutli-family arrangements.  Demand for rental housing will also increase as lending markets return to more conventional methods of home financing, thereby all but shutting out sub-prime borrowers except in limited or highly restricted circumstances.  Preference for rentals will also be strengthened by fear of recent events in the nation's real estate markets.  Rising energy prices will bolster this preference.  As a result, families will seek to congregate in denser, urban areas.  Acting on these preferences in most places, however, is illegal because of zoning laws that do not allow them.  Therefore, cities will need to rewrite exisiting codes to keep pace with consumer demand.  If they fail to act, single-family detached homes will continue to be overbuilt relative to the emerging demand.

Will Cook, Charleston School of Law

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