Urban Homeownership Is Dying Away
Not much vacancy. | Photo By Shutterstock
[Updated at 8:15 p.m. with context from a Pew Philadelphia Research Initiative study on the same subject.]
Cities are booming, but urban homeownership is fading fast, a new study out of the New York University’s Furman Center shows.
In 2006, renters outnumbered homeowners in just five of the nation’s 11 largest cities: Miami, Boston, San Francisco, Los Angeles and New York. But by 2013, renters dominated in nine of the top 11 cities.
Not included in that list? Philadelphia.
A longtime bastion of urban homeownership, renters are still in the minority in Philadelphia. But probably not for too much longer. In fact, Philadelphia’s rental population grew 28 percent between 2006 and 2013, the biggest gain of all 11 cities the Furman Center examined. Logically enough, Philadelphia’s rental vacancy rate plummeted by six percentage points over the same period.
So what’s driving this?
Philadelphia’s newest residents are comprised largely of millennials and immigrants, two groups that are far more likely to rent than they are to own homes. Between 2007 and 2013, the size of Philadelphia’s 20-35 year old population grew a whopping 35 percent, while the city’s foreign-born population grew by 21 percent. That’s your rental demand right there.
As strong as that demand is, it’s not yet enough to tip Philadelphia into a majority-renter city for two big reasons according to Kevin Gillen, an urban economist at Drexel University’s new Lindy Institute for Urban Innovation. Says Gillen:
- Although the dynamic is changing, Philadelphians are far more likely to have been born and raised in the city than are residents of other metros. Many city residents live in the same homes they grew up in, and in turn pass the family home along to their children.
- Philadelphia remains “a very affordable city,” says Gillen. The city’s price to income ratio—that is, the average cost of a home relative to the average Philadelphia household income—is about 2.5. In more expensive cities like New York or Washington D.C., home prices are 5 or 6 or even 7 times as high as household income.
Still, the trend line is clear. A Pew Philadelphia Research Initiative report on the same subject last year showed that while 58.2 percent of Philadelphians owned their homes in 2006, only 52.2 percent did in 2012. Larry Eichel, director of that Pew initiative, says that figure is down to 51 percent in the most recent available Census data.
The Pew report showed that homeownership rates are in steepest decline across lower Northeast Philadelphia, Fairmount, Nicetown, Manayunk and sections of Southwest Philadelphia.
So is this a good or bad development for cities? The Pew report suggests that it’s a mixed bag. For low-income Philadelphians, homeownership can be one of very few available means to accumulate wealth. The Pew report also cites data that suggests homeowners are more likely to be civically active than renters: they vote in higher numbers, for instance, and are somewhat more likely to participate in neighborhood or school organizations. But widespread homeownership also makes workers less mobile, and it can, according to the Pew report, “stall revitalization and limit opportunity for others to move into better neighborhoods.”
For more, take a look at the Pew study, and check out the Furman Center’s informative chart below.