Will Demographics Solve the Homeownership Affordability Challenge?

To improve housing affordability, we need to increase supply. Reducing regulations and loosening local zoning and land use restrictions can lead to the construction of smaller and more affordable homes. Revising current tax code to increase the capital gains tax exclusion could also encourage more existing homeowners to sell.

But is it possible that demographics will solve the affordability challenge? Are there some markets where the aging of the population will substantially shift supply, thereby improving affordability?

Homeowners are significantly older than the overall population. More than one in five homeowners in the U.S. is aged 70 and older, and nearly 45% are age 60 and older. By contrast, about 19% of all households are headed by someone age 70 and older and 37.1% are aged 60+.

As the population ages and older homeowners “move out of the housing stock”, homes will be freed up for younger buyers. Changing demographics do not offer a “quick fix”, but other solutions won’t deliver relief in the near-term either. How much potential is there for demographic change to unlock supply?

To investigate the potential for a “demographic solution” to housing affordability, I examined the shares of homes owned outright, without a mortgage, by homeowners age 70 and older. These are the households that are most likely to put their homes on the market in the near term, adding to the supply, creating more options for would-be buyers, and potentially helping to ease home price growth.

The impending “Silver Tsunami”, defined here as the transition of mortgage-free homeowners aged 70 and older out of their homes, is not evenly distributed across the country. The highest concentrations of older homeowners generally are in relatively affordable metros in the Midwest. However, a few highly unaffordable coastal markets are also primed for a significant increase in supply by way of a “Silver Tsunami.”

The markets with highest supply unlock potential are concentrated in the lowest-price metros. The metros where the highest percentage of the total housing supply will soon hit the market are heavily concentrated in affordable Rust Belt and Midwestern metro areas. Pittsburgh, PA leads the top 50 metros, with 19.5% of its entire owner-occupied housing stock held free and clear by older adults age 70 and older. Pittsburgh is followed closely by Buffalo, NY (17.8%), Cleveland, OH (16.9%), Detroit, MI (15.2%), and Milwaukee, WI (15.1%). For these markets, this upcoming wave of supply will likely just reinforce their status as the most accessible and affordable markets for homebuyers.

A few severely unaffordable coastal markets could also see an uptick in inventory as a result of the Silver Tsunami. High 70+ homeownership is not exclusively limited to low-cost, more affordable markets. There are a few specific, expensive housing markets that could see significant supply relief because a large share of their total housing supply is held by seniors. Miami, FL (19.0%) and Tampa, FL (18.6%) have some of the highest senior ownership shares in the country, representing the potential for a large impending inventory unlock despite high median list prices. New York, NY-NJ (16.8%) and Providence, RI-MA (15.2%) similarly show the potential for a relatively near-term increase in supply in expensive Northeast corridors.

There will be no Silver Tsunami relief in many unaffordable Sunbelt and Western markets. The markets facing the worst long-term affordability constraints are the fast-growing tech and migration hubs where prices are high and the Silver Tsunami potential is incredibly low. In metros like Raleigh, NC (10.1%), Atlanta, GA (10.2%), Denver, CO (10.3%), and Austin, TX (10.6%), only about one in 10 homes are held outright by older adults. Because such a small share of their total housing supply will naturally turn over, these expensive markets will likely remain starved for inventory, with little potential for demographically-driven improvements in affordability.

So, will demographics solve the homeownership affordability challenge? The answer is no, but the aging of the population will dramatically shift the housing market landscape in specific parts of the country.

In older Rust Belt and Midwestern cities, the Silver Tsunami will help sustain and protect their existing status as affordable havens. In aging coastal markets like Miami, Tampa, and New York, demographic turnover offers a glimmer of hope for future inventory relief in the relative near term.

However, for the rapidly growing Sunbelt and Western boomtowns, such as Austin, Atlanta, Denver, and Raleigh, demographics offer little help for increasing housing supply and improving affordability. Because only about one in 10 homes in these markets are owned outright by someone 70 or older, they will not see a natural, demographically driven wave of inventory. 0020For places where demand remains strong and inventory is tight, land use and zoning reform and financial tools targeting supply are going to be crucial for helping to address the homeownership affordability challenge.