Annual housing report shows disparate outcomes during pandemic

By: Benjamin Harrold

The Joint Center for Housing Studies of Harvard University recently released their annual State of the Nation's Housing report for 2021. The report outlines how the nation’s growth in headship and homeownership rates are being driven by millennials who are just catching up to previous generations in forming independent households. This household growth, however, demonstrates how the pandemic exasperated existing economic disparities based on education, wealth, and race. Wealthy, white, college educated households were significantly more likely to weather the pandemic while working from home and saving money while low-income, high school-educated households of color were more likely to endure job losses, lost income, and face outstanding mortgage payments. 

Millennials are leading the pack in growth 

The increase in overall household growth has been accelerating over the last several years. Between 2013 and 2016 the country added 856,000 households and then another 1.3 million in the following three years. This expansion is largely because millennials (people born between 1985 and 2004) are forming independent households faster than before. Through most of the 2010s, adults under the age of 35 saw their household headship rates decline. Millennials are now beginning to catch up to headship rates that previous generations had at the same age. Headship rates among adults age 25-29 peaked around 45 percent in 1980 and steadily fell to about 39 percent in 2013. Now, headship rates among adults under 35 has increased significantly. The economic impact from the pandemic temporarily curtailed this trend and forced some millennials to move back in with their parents, but their rates of headship rebounded by the end of 2020. 

Growth in headship is mirrored by an increase in homeownership rates, which have risen 0.3 percentage points from last year to 65.6 percent. Millennials led the growth again with a 0.8 percent increase between the first quarters of 2020 and 2021. The rates of homeownership amongst other generations had varying changes. There were increases for those aged 35-44 and 65 and over, while the rates for those aged 45-54 and 55-64 declined slightly. 

A confluence of factors can help explain the sharp rise in millennial homeownership: not only are they reaching their prime homebuying years, but record low interest rates, flexibility in location created by remote-work, and increased savings due to the economic shutdowns for some households enabled many people living in urban areas to buy suburban or rural homes. While demand for single-family homes will likely only increase within this age group, it is unclear whether the reopening of activity centers in cities will draw them back to urban areas or if a permanence of remote work will make them prefer the size and relative affordability of suburban and rural neighborhoods. 

Disparate realities caused by wealth and education post-pandemic 

Of course, these circumstances only apply to some socioeconomic groups. In early 2021, 43 percent of all households and 53 percent of renters lost income due to the pandemic. Of these, 48 percent earned less than $50,000 and 74 percent were headed by someone without a college degree. Meanwhile, 68 percent of workers with a bachelor's degree could do work from home while only 24.5 percent of those with only a high school diploma could do so. The dichotomous economic realities during the pandemic of buying a home or losing income demonstrates the increasing disparity caused by wealth and education. 

Two of the largest determinants of wealth are homeownership and race. In 2019, the median household wealth for homeowners was $254,900 ($98,500 if excluding home equity). For renters it was just $6,270. Meanwhile, in 2020 white households held over seven times the wealth of Black households and over five times the wealth of Hispanic households. While homeownership helps reduce the disparity slightly, the median net wealth of Black homeowners was still less than 40 percent that of white homeowners and 70 percent of Hispanic homeowners.  

The pandemic disproportionately impacted nonwhite homeowners. Half of Hispanic homeowners had lost income by early 2020 along with 43 percent of Black, 39 percent of Asian, and 35 percent of white homeowners. This has led to more homeowners of color being behind on mortgage payments at a rate of 17 percent for Black, 16 percent for Hispanic, 16 percent for Asian, and only 7 percent for white homeowners. 

Low-income homeowners are also significantly more likely to be struggling to make mortgage payments. Homeowners making less than $25,000 were behind on payments at a rate of 24 percent in the first quarter of 2021. This rate of 15 percent for those earning $25,000-$49,999, 11 percent for those earning $50,000-$74,999 and 5 percent for homeowners earning at least $75,000. 

There were 2.3 million homeowners who could delay their mortgage payments under the CARES Act and are still in active forbearance in early 2021, a group disproportionally comprised of people of color and those who have little equity in their home. This July marks the end of forbearance for most of them. As of July 31, this group will be required to begin making payments again. This is easier said than done. It is estimated that 22 percent of borrowers still in forbearance will have less than 10 percent equity in their home. Should these homeowners be unable to resume mortgage payments, they would have so little equity that selling their homes would not yield enough to pay off their debt. 

However, eligible Vermont homeowners can receive help from VHFA’s upcoming Homeowner Assistance Fund Program, which will use federal ARPA funds to provide relief for homeowners experiencing financial hardship due to the pandemic, with the goal of preventing future foreclosure.  

The Vermont COVID Emergency Mortgage Assistance Program is no longer accepting applications. For emergency rental assistance, please contact Vermont State Housing Authority.