The US homeownership rate may not be as high as you think

Americans often think of homeownership as both a goal and a norm — after all, the U.S. homeownership rate is 65 percent, and as high as 75 percent in some states.

But one Federal Reserve economist says that we’ve been measuring homeownership the wrong way and that U.S. adults are about as likely to rent or live in someone else’s home as they are to own their own.

Erik Hembre says his work “should reframe the basic number we have in our head. I went from a baseline of about two-thirds of people own their homes and that’s just the way it’s always been, to: Well, it’s closer to half.”

The difference in the standard numbers versus Hembre’s numbers basically comes down to whether to count houses or people.

The homeownership rate is generally given as the percentage of homes that are occupied by their owners. If there are 10 homes on a street and seven of them are owner-occupied while three are rented, that’s a 70 percent homeownership rate.

Hembre, instead, came up with what he calls HPOP: the homeowners-to-population ratio. He counted up all Americans over 18 years of age, then looked at how many of them live in a home they own. The number is 53 percent.

The reason Hembre’s homeownership rate is so much lower than the standard 65 percent national owner-occupancy rate is that many adults live in a home where the owner lives, but they aren’t the owners of the unit. If you’re living with a relative in the relative’s house or renting a room from a friend who owns the house, you don’t count as a homeowner in Hembre’s metric.

Hembre attributed the difference to several causes. A small amount comes from roommates and from elderly parents who reside in their adult children’s homes; a bit more comes from other relatives such as siblings. The largest share by far is due to the high rate of adult children who live in their parents’ homes.

“Younger households are becoming less likely to be homeowners. HPOP really makes that point more clear,” Hembre said.

Overall, both HPOP and the owner-occupancy rate have fallen about 2 percent nationwide since 2006, but the patterns of who owns homes have changed. While adults in their 20s and 30s struggle to buy homes, the HPOP for people over 70 has risen five points since 2006, as elderly people remain in their own homes longer. “Those are kind of balancing each other out,” Hembre said.

He also analyzed the HPOP of different groups, such as ethnic groups and married-versus-single people. The differences indicate who is most likely to live in owner-occupied homes without being owners themselves. Married people have a 76.9 percent HPOP, not much lower than their 80.8 percent owner-occupancy rate. People who have never been married have a 17 percent HPOP, far below their 36.4 percent rate of living in owner-occupied homes. (Widowed, divorced and separated people all fall somewhere in between.)

For calculation purposes, Hembre treated both partners as the owners of a home if one partner owns it, for both married and unmarried couples.

Michael Neal, a housing analyst at the Urban Institute, said Hembre’s measure avoids one of the pitfalls of standard metrics, which tend to lump everyone under the demographics the person considered the head of household.

“There are interracial couples where the head of household is not Black; we might be missing some families where there’s homeownership by a Black person. ... Maybe there are two people who are two different age groups who are married,” Neal said. “In some cases, this can really matter for being accurate and providing accurate measures for policymaking.”

States with expensive housing, such as Hawaii and California, tended to have the biggest differences between their owner-occupancy rates and their HPOPs.

Dennis Shea, who leads the Bipartisan Policy Center’s housing program, found Hembre’s metric interesting but cautioned against discounting the standard measure of U.S. homeownership too much. Many of the non-homeowners tallied in HPOP, he noted, are people such as college students and nursing home patients who wouldn’t be expected to be homeowners.

“I think it’s a useful new analytical approach that might provide insights about where people truly are in their economic journey,” Shea said. “I wouldn’t draw some drastic conclusion that somehow the true picture of homeownership in the United States has been radically changed by this new approach.”

Hembre noted that the idea that only half of adults are homeowners doesn’t mean half will always be renters or guests in someone else’s home. “Between the ages of 18 and 70 or 80, most people do become homeowners at some point. This is about if they are at any given time.”