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Peak Millennialsand the Rental Crisis
Dowell Myers
New urban preferences of Millennialsor just a temporary presence?
The Questions
And why the rental crisis?
How can planners prepare for the future?
But why would it end??
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Basic Facts on the Millennial Generation
Born 1980 to 1999 (but many alternatives)
83 million is larger than the Baby Boomers
This is a generation, not an age group, but analysts currently focus on ages 20 to 34
Millennials are found everywhere, but their residence downtown and in close‐in areas gets the greatest attention
Dowell Myers, USCPrice
On
Urban Preferences
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“For me, car is king. Nothing will replace my car as my main mode of transportation” – who disagrees?
Under age 40 26%Over age 50 18% (NAR 2013:49)
When deciding where to live, “What’s important to me is living in a place at the center of it all.” – who agrees?
Under age 40 23%Over age 50 7% (NAR 2013:48)
From the National Assoc. of Realtors
Dowell Myers, USCPrice
Political Polarization of Preferred Community Types
Dowell Myers, USCPrice
Liberals Conservatives
Cities 46% 4%
Suburbs 21% 20%
Small town/rural 33% 76%
Total 100% 100%
Pew Research Center (2014: 45)
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The younger generation has stronger preferences for urban living,
but will it last when they grow older?
Yes there is some survey evidence….
.
But mainly we see “preference” based on urbanpresence and how their numbers are growing.
How strong was the contextual effect of the Great Recession?
Supposed preferences might be driven by limited opportunities, but those are now improving….
New Urban Preferences
Dowell Myers, USCPrice
On
Urban Presence
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Population growth by distance from city hall 1990-2000 and 2000-10, Ages 20 to 34, top 100 MSAs
Myers and Lee 2016
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
0 10 20 30 40 50 60 70 80
Po
pu
lati
on
Gro
wth
(%
)
Distance from City Hall (mi.)
1990-00 2000-10
1990-00: – 5.4%
Population growth by distance from city hall 1990-2000 and 2000-10, Ages 20 to 34, top 100 MSAs
Myers and Lee 2016
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
0 10 20 30 40 50 60 70 80
Po
pu
lati
on
Gro
wth
(%
)
Distance from City Hall (mi.)
1990-00 2000-10
1990-00: – 5.4%
2000-10: 6.4%
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The TheoryCohort Flow in the City
How Does the Number of MillennialsGrow in Cities?
Population level
In‐Flow
Out‐Flow
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Millennials are a set of cohorts born earlier and now flowing into adulthood
Society is age‐graded with expected rolesat each age and slots to be filled, including:
age appropriate housing unitsentry level jobs, etc.
These slots are turned over every year or twoto newcomers who are aging into position
and replacing the preceding cohorts when theymove on to the next life stage
Life Course Perspective
Dowell Myers, USCPrice
Inflow = Number of Eligible Candidates X Preference X Ability
Outflow = Number of Eligible Candidates X Preference X Ability
“Ability” represents the access to resources and opportunities.
“Preference” is desire, not just revealed location.
All of these components are changing, but preferences are least understood and so are not a solid basis for judging future outcomes.
Dowell Myers, USCPrice
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Three Reinforcing Cycles that Generate Millennial Impacts
Rise and fall of births 25 years earlier
Rise and fall of employment growth, 1990 to (projected) 2022
Progress through the housing lifecycle is blocked but then resumed (we expect)
Dowell Myers, USCPrice
TheBirthCycle
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Peak Millennial BirthsAnnual Births in the U.S., 1960 to 2013
Source: National Vital Statistics Reports, Vol. 64, No. 1, Table 1, January 15, 2015
Dowell Myers, USCPrice
4.2 M in 1990
0.0
1.0
2.0
3.0
4.0
5.0
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
U.S. B
irths (m
illions)
Year
32% greater than in 1976
Competition Faced by 25 Year‐olds
• Fighting for housing and entry‐level jobs
• Focused on their peers age 25 and four years older, i.e. all of the 25‐to‐29 age group
Dowell Myers, USCPrice
6/20/2016
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TheEmploymentorBusinessCycle
–20.00
–15.00
–10.00
–5.00
0.00
5.00
10.00
15.00
20.00
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
5‐Year CumulativeChange in DemographicPressure
5‐Year % Job Growth
Demographic Congestion and Job GrowthComparison of 5‐Year % Job Growth and 5‐Year Cumulative Change in Demographic Pressure
Dowell Myers, USCPrice
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TheHousingLife‐Cycle
Housing Life Cycle Progression
Percent of People Who Are Living inEach HousingCircumstance
Dowell Myers, USCPrice
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
15‐19
20‐24
25‐29
30‐34
35‐39
40‐44
45‐49
50‐54
55‐59
60‐64
65‐69
70‐74
75‐79
80‐84
85+
Per100persons
Age
Renter Heads
Owner Heads
Spouse/Partner of Head
With Roommates, Parents, or inGroup Quarters
Data for US — ACS 2014
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How Does Housing Opportunity Grow?
• New construction of housing units
• Vacancies from more turnover of existing units
Dowell Myers, USCPrice
Housing Unit Construction in the U.S., Total and Multifamily, 1970–2014 (1000s)
Dowell Myers, USCPrice
0
500
1,000
1,500
2,000
2,500
(Number of Units in Thousands)
All Completions MF Completions
Source: U.S. Census Bureau, Survey of Construction.Note: The recession‐and‐recovery period (2008‐2012) is highlighted red.
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What Happens in a Housing Shortage?
• Would‐be home buyers become renters
• Millennials keep arriving and Existing Renters get sandwiched betweenthem and the diverted homeowners
• Developers slowly try to build new supply
• Desperate home seekers scavenge and over pay, double up, or disappear
Dowell Myers, USCPrice
Cascade of Diverted & Growing Households in Los Angeles County
Would‐be homeownerswere diverted into rentals
314,000
Joining the expected growth of renters from Millennials & others 212,000
Creating Total POTENTIAL growth in renters ……………… 526,000
Changes 2006 to 2014, Actual Population, but Assuming 2000 Patterns of Housing Occupancy
Dowell Myers, USCPrice
Analysis by JungHo Park
Based on Myers, Painter, Lee and Park (2016)
How well was this rental demand met by new supply?
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When Growing Rental Demand Meets Limited Housing Supply
ACTUAL lncrease in renter‐occupied units …………… 177,000
Construction of Multifamily81,931 units permitted
Conversion of Single‐Family to Rental30,000 units approximately
LEAVES displaced renters………… 353,000( 9.8% of 2014 expected households)
Changes 2006 to 2014 in LA County
Dowell Myers, USCPrice
Total POTENTIAL growth in renters ………………………………… 526,000
New Supply
To be housed in
Less the
Analysis by JungHo Park
Conversion to Additional UnitsNot known how many units
Net Result for Millennials
• Slowed down, backed up into parents’ homes, and bottled up in singles areas
• But Millennials over age 25 or 30 are breaking out and looking for better housing where they can find it
• That includes gentrifying housing close to singles districts
Dowell Myers, USCPrice
6/20/2016
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Conclusion
Is this a New Era for Millennials?
Freed from Housing Gridlock
The 3 cycles once were harmonized to maximize urban residence (from 2005 to 2015).
But the 3 cycles now are pulling together in the opposite direction (from 2015 to 2025).
.
The larger Millennial cohorts would have created a more competitive environment for entry‐level jobs even in a strong economy, but in the Great Recession
the opportunities were doubly limited.Now the opportunities are finally beginning to grow.
And housing opportunities are also beginning to resume, so the Millennials are free to finally move
where they like.
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Articles Referenced in the Presentation
Dowell Myers, "Peak Millennials: Three Reinforcing Cycles That Amplify the Rise and Fall of Urban Concentration by Millennials," Housing Policy Debate, April/May 2016: http://www.tandfonline.com/doi/full/10.1080/10511482.2016.1165722.
Dowell Myers, Gary Painter, Hyojung Lee, and JungHo Park, ”Diverted Homeowners, the Rental Crisis, and Foregone Household Formation,” Special Report, Research Institute For Housing America, Mortgage Bankers Association, Washington, D.C., April 2016.
Thank you
Dowell Myers
USC PopDynamics
The future remains to be determined……