Baby Boomers are expected to have the most dramatic impact on housing over the next 20 years because of their increased longevity and sheer size, said Christopher Herbert, Ph.D., managing director of the highly-acclaimed Joint Center for Housing Studies (JCHS) at Harvard University. Herbert presented JCHS’s recent findings at the annual Real Estate Trends in Central Ohio 2017 program sponsored by the Columbus District Council of the Urban Land Institute (ULI Columbus).
JCHS’s study, “Projections and Implications for Housing a Growing Population: Older Households 2015-2035” provides insights into what the housing industry should expect in the coming years and how it can respond.
See Dr. Herbert’s Presentation According to the report, household formation rates are projected to decline for every cohort, from young adults to seniors. Declining headship rates with more households made up of one to two individuals are expected to impact the size and type of housing in the future.
JCHS anticipates an increase of $13.6 million households between 2015-2025, consistent with growth levels from the 1990s. The U.S. population aged 65 and over is expected to grow from 48 million to 79 million while the number of households headed by someone over 65 will increase by 66 percent. By 2035, one in three households will be 65 or older, and one in 10 will be 80 years or older.
Among those older than 80, both renters and owners express a desire to age in place. That desire and a projected increase in the disability rate between 2025 and 2035 will provide ample opportunity for innovations in housing and support services, ranging from telemedicine and monitors in homes to driverless cars. It will also boost demand for housing units with universal design elements such as zero-step entrances, single-floor living and wide halls and doorways. Only 3.5 percent of existing homes offer all three of these features.
Meanwhile, several trends point to a need for more affordable housing. For example, the number of older adults who are cost burdened due to carrying higher amounts of mortgage debt into retirement is growing. And, across age groups, the number of cost-burdened renters is at a record high. According to Herbert, even moderate income renters struggle to afford housing.
Columbus 2020 Research Director Analyzes Trends for Central Ohio
An overview of the Urban Land Institute’s Regional Real Estate Trends Report presented by Jung Kim, managing director, research and business, at Columbus 2020, offered highlights of trends impacting the country with a focus on the Central East region which includes Ohio.
Most participants expect inflation to remain at current levels while commercial mortgage rates will increase moderately. Industrial/distribution, multifamily and single family housing offer the best prospects for investment and development.
Given JCHS’s report, it should come as no surprise that affordable housing, moderate-income housing and age-restricted housing are high on the list of investment recommendations.
While retail in general, did not fare as well as other categories, for investment and development prospects, one specific area, urban/high street retail, offers strong prospects.
Local Panel of Experts Discuss Implications of JCHS Report for Central Ohio’s Development Community
Following Herbert’s presentation, Bob Schottenstein, president and CEO of MI Homes, Hal Keller, president of Ohio Capital Corporation for Housing and Rob Vogt, partner of Vogt Strategic Insights, joined Herbert in a panel discussion facilitated by Autumn Glover, director of OSU-PACT, to discuss local implications of the JCHS housing study.
Affordability of housing and the increasing need for senior housing dominated the discussion. Keller noted that the best portfolio performance for Ohio Capital Corporation is among senior housing that includes three-story elevator buildings and flats with garages. He added that the organization also sees a huge need for support services among seniors seeking to age in place.
Vogt said the desire among seniors to age in place often loses out to the reality that they can no longer deal with stairs or maintaining a home. The challenge for builders is to meet the dual needs for affordability as well as the physical challenges of aging. Hebert added that seniors may be bettered served by options that allow them to “age in community” as opposed to aging in their homes, although many still carry mortgage debt and are holding on to homes because of their reduced value and the higher costs of newer developments.
According to Schottenstein, 19 of the top 20 builders in the country today have senior housing in their portfolios accounting for roughly 20% of their business compared to years ago when Del Webb senior communities were among the only options.
One of the biggest challenges developers face in creating affordable and moderate-income housing is the cost of land and zoning restrictions limiting the amount of homes that can be built per acre, he added. Schottenstein said a recent development of six to eight homes per acre in Orange County, California with larger homes and little to no yards would be a challenge to build in central Ohio due to regulations.
Keller pointed to a successful development built in partnership with The Ohio State University on Columbus’ east side that features mixed income, mixed age housing and even a day care for seniors and young children as a model that can work.
Vogt noted that Millennials and Baby Boomers are seeking the same amenities with less maintenance and upkeep in more of an urban location inferring that existing housing stock may not be appealing to this younger population for homeownership. Schottenstein said that Millennials preferences for renting over ownership might have more to do with their student debt, the fact that they are getting married at an older age and their fears over job security than lack of attractive housing options.
ULI Columbus Communications Committee Chair
Principal at Pentella Unlimited