This is the first part of a two-part conversation with Arthur C. (Christian “Chris”) Nelson, professor emeritus of urban planning and real estate development at the University of Arizona, as well as presidential professor emeritus of city and metropolitan planning at the University of Utah. Part Two is available here.

More about Dr. Nelson and a link to the paper that inspired this conversation at the bottom of this post.

Ben Brown: Thanks, Chris, for helping us work through some daunting implications of housing trends you’ve identified. We should start, as you often suggest, with the caveat about predicting the future: 

There are no future facts. And the farther out the future we project, the more complex the potential interactions and the weaker the case for absolute certainty. Yet whether we’re families or businesses or governments, we’re still stuck with planning for what may be ahead. So, we make educated guesses from the best research and analyses available. 

The demographic research and analyses you and your colleagues have produced suggest that, without significant policy changes, we’re risking the deepening of an equitable housing crisis over the next two decades. What’s lead you to that conclusion?

Chris Nelson: It boils down to too many homes for too few buyers and renters in many corners of even our most vibrant metropolitan areas — and more important, to large swaths of the nation. 

We’re already seeing impacts of a supply-demand imbalance in popular metros struggling with housing affordability. We tend to frame the crisis in terms of economic inequality. And that’s certainly the case. But we haven’t been paying enough attention to sweeping demographic changes already in motion that are driving the challenges and that are likely to complicate everything. 

If we can’t adjust ways in which we plan, build, and finance housing, the results are going to be devastating for substantial segments of the population.

The Demography of Housing 

BB: Okay, so what are the overarching demographic changes you’re talking about?

CN: By 2040, tens of millions of baby boomers (born between 1946 and 1964) as well as Gen-Xers (born between 1965 and 1980) will transition from career and wealth-building to preserving – and in some cases worrying about — quality of life as they age. Many, perhaps most of them, will want to exchange their larger homes on larger lots for easier-to-manage smaller homes on smaller lots or in attached homes. 

Tens of millions of millennials—born between 1981 and 1997—will be forming households with children but may not want boomers’ large homes on large lots. Instead, they’ll compete with the downsizing boomers for smaller homes on smaller lots or attached homes, especially those in walkable communities. The newest generation—Gen Z born between 1998 and 2015—will become starter home households. They’ll be seeking mostly smaller homes on smaller lots, attached homes, and usually as renters. 

So, the changing demands for the types and location of homes of four generations (Boomers, Gen X, millennials, and Gen Z) are going to overwhelm the current and projected supply of homes in those categories unless we change the ways we’re planning and building for that future.

BB: What about the data makes you think this is such a likely scenario?

CN: To start with, let’s look at what we can know with certainty: changes in shares of the population each generation has added to the population at the birth year of its first members:

Beginning in 1946 and continuing for the next 18 years that marked their generation, Boomer babies increased the U.S. population by more than half (54 percent) of the 1946 population. And as they aged, their numerical dominance moved markets and diluted the impacts of the generations that followed.

For their part, Boomers’ parents wanted something different to raise families compared to where they were raised. These included safer places than cities were perceived to be, open spaces, clean air, healthier environments, yards for children to play in, and new homes with modern appliances. The demand for new homes to serve new households with children in the Baby Boom simply could not be met by cities. Boosted by federal housing and finance policies, suburban communities were poised to accommodate them. And by 1970, suburbs had more people than central cities. 

When boomers formed households of their own, they typically chose landscapes with which they were familiar: suburbs. And because they also enjoyed unprecedented incomes and housing finance options, their generation led the national wave to home ownership, which peaked at 69% in 2005.

The height of the boomer-driven surge in housing demand, especially for owner-occupied single family detached homes, occurred during the period 1990 through 2010. Between those years, the demand for mostly boomer households with children accounted for 82 percent of the market for new housing. Indeed, 85 percent of all new homes built were single family detached homes during this period. For the most part, the market did well by increasing supply to meet demand during that epoch.

A Shift Already Underway 

BB: So what’s different now?

CN: The market began to adjust to changing demands. Between 2011 and 2017, single family detached units accounted for just 44 percent of the net change in share of occupied housing units — or roughly about half the rate seen during the 2000s. Attached units (apartment buildings, condos, town homes, etc.) gained 59 percent share over the same period. 

BB:. Which sounds like the beginning of the supply-demand shift you’re talking about.

CN:. There is always a combination of factors affecting housing demand. But what I’m arguing here is the impossible-to-ignore effects of seismic demographic change. Look at the graphic below that allocates housing demand cycles into four stages based on the age of heads of households and family size.

In the youngest demographic group are starter home households where householders are under 30 years of age. This group is dominated by singles and young couples usually without children. Their households average about 2.5 persons per occupied residential unit. 

Next are those in the peak housing space part of the household life cycle. These are households with children, often including children returning to or staying at home longer than in the past. They typically want larger homes and larger lots. Householders range from 30 to 49 years of age with average household size peaking at about 3.4 persons. 

Then comes the empty-nester stage, with household heads ranging about 50 to 64 years of age. Often, they stay put soon after their children leave. Their household size ranges about 2.30 persons or about the size of starter home households.

The last grouping has household heads 65 years old or older. Children are gone; so household averages shrink below 2.0 persons and even below 1.5 persons among households over 80 years of age. They’re often looking to downsize into smaller homes on smaller lots and often in locations more accessible to services than their current homes. 

Now, look at the projected generational demand shares over the next two decades:

There will likely be 13 million more senior homeowners between 2018 and 2038 than all other households combined. And there are not enough younger or “upsizing” households to acquire homes of those aging or downsizing households, even if millions of seniors are able to “age in place.” 

What this means is that as boomers and Gen Xers continue aging into the downsizing stage of life, the demand for housing to accommodate them will dominate the housing market well into the 2030s and 2040s. And the kinds of housing most are likely to need won’t be the ones in the places where they’re living.

The Tasks Ahead

BB: So that will strand some seniors in homes they can’t sell, at least at prices they’re counting on to secure their quality of life in the final stage of their lives. And, at the same time, those who have the means to act on their preferences for moving could force younger generations to bid against the downsizers for smaller homes and apartments in high-demand/low-supply places. Is that right?

CN: Correct. Though not everywhere. The most vulnerable markets of the future are likely to be many of those vulnerable to social and economic distress now, places with over-concentrations of older, lower-wealth home owners and fragile economies. Places distant from metros with the housing types and services most likely to attract career-building younger families.

BB: Okay, we have a demographic frame that implies a worrisome escalation of the current-supply demand crisis. The questions that arise, of course, are ones like these: 

What’s the future of seniors’ “aging in place” aspirations? Or the potential of work-from-home movement taking some of the slack in the oversupply of large homes in the burbs? And if the impacts of these massive demographic shifts are as threatening as you suggest, what policy changes might ameliorate those impacts? 

We’ll explore some of those issues in Part 2.

Dr. Nelson is the author of more than 20 books and 300-plus other works. He’s been the principal or co-principal investigator on more than $50 million in grants from the National Science Foundation, the U.S. Department of Housing and Urban Development, the U.S. Department of Transportation, Brookings, and the Urban Land Institute, among others. The only person who is both a Fellow of the American Institute of Certified Planners (FAICP) and a Fellow of the Academy of Social Sciences (FAcSS), Dr. Nelson has been a practicing planner, researcher, advisor, and educator spanning six decades from the 1970s into the 2020s.

For a more complete presentation of these issues and the research that informed them, see: 

Nelson, Arthur C. (2020) “The Great Senior Short-Sale or Why Policy Inertia Will Short Change Millions of America’s Seniors,” Journal of Comparative Urban Law and Policy: Vol. 4 : Issue 1 , Article 28, 473-528. Available at: https://readingroom.law.gsu.edu/jculp/vol4/iss1/28

— Ben Brown