By Henry Grabar
Between 1970 and 1990, the population of Philadelphia shrank by a
quarter, dropping from 1.95 to 1.59 million. Like many American cities,
it seemed caught in a downward spiral.
Photo Credit: Chungking/Shutterstock.com
Since then – like many
American cities – Philadelphia has stabilized. The population now
appears to have bottomed out at the millennium, and has been regaining
residents over the past decade. But as it rebounds, Philly is becoming a
different kind of city.
In the two most recent decades, which
comprise the bounce of the city’s population curve, owner-occupied
housing dropped even more steeply than in the ’70s and ’80s. Between
2000 and 2012, the percentage of Philly houses and apartments inhabited
by owners dropped from 59 to 52, the second-sharpest decline among big
U.S. cities during that time.
Meanwhile, renter-occupied housing
exploded. More units are rented today in Philadelphia than in 1970,
despite 400,000 fewer residents. According to a
report from
Pew Charitable Trusts, the size of the Philadelphia rental stock has
grown by 37,000 since the millennium — a gain of more than 10 percent.
Philadelphia is a concentrated case of a larger trend in American housing: We are increasingly
renting instead of buying our homes. Rental household growth is rising at
double the rate it has in previous decades. Developers are building
more multi-family units than they have in years. Last month, the home ownership rate
fell to a 19-year low, down to 64.7 percent from a peak of 69.2 percent in 2004.
This
is bad news, insofar as it demonstrates that Americans are struggling
to buy homes. It’s bad news for the housing industry, whose greenfield
development machine has less fuel. But as a long-term development, it
signifies an emerging model of American life released from the cult of home ownership. It would make Americans more mobile (
as we once were), and
more able to adapt to economic changes. Jordan Rappaport, a senior economist at the Kansas City Fed,
elucidates some benefits of the shift from single-family to multi-family housing (which is closely related to the owner-renter shift):
It
will shift consumer demand away from goods and services that complement
large indoor space and a backyard toward goods and services more
oriented toward living in an apartment. Similarly, the possible shift
toward city living may dampen demand for automobiles, highways and
gasoline but increase demand for restaurants, city parks and
high-quality public transit.
For the moment, though,
Americans are renting across the spectrum of the built environment, in
cities (long skewed toward renters), suburbs (shifting in that
direction) and exurbs. Wall Street has taken notice: The Blackstone
Group, a private equity shop, now
owns and rents some 45,000 homes. At one point, the firm’s housing division was spending $150 million a week buying houses to rent.
But academics, politicians and
homeowners have
long been suspicious of tenants. Increasing the home ownership rate has
been a foundational goal of American politics at the federal level for
most of the past century. In fact, it’s older than that: Most states had
property restrictions on voting well into the 19th century.
“For a
man who owns his home acquires with it a new dignity,” Sen. Charles
Percy said in 1966. “He begins to take pride in what is his own, and
pride in conserving and improving it for his children. He becomes a more
steadfast and concerned citizen of his community. He becomes more
self-confident and self-reliant. The mere act of becoming a homeowner
transforms him. It gives him roots, a sense of belonging, a true stake
in his community and well being.” The tax code is engineered to support
that viewpoint, however off-key it may sound to the millions of
Americans mired in foreclosure proceedings.
“Home ownership and Neighborhood Stability,” a 1996
paper by
planning professor William M. Rohe from which the Percy quote comes,
offers what might now be seen as the established academic perspective on
renters. Rohe and co-author Leslie Stewart found that the home ownership
rate does indeed have a positive correlation with various social and
economic attributes of a “good” neighborhood. It wasn’t just that
homeowners kept the paint fresh and the lawn mowed. Their status led “to
greater social interaction within, and psychological identification
with, the neighborhood.”
But a significant amount of doubt remains
about cause and effect. The increase in “neighborhood stability”
(which, per the authors, includes resident tenure, property values, and
physical and social conditions) “may be the result of the types of
households drawn to home ownership” rather than the experience itself.
And since home ownership is closely tied to income, family size, marital
status and age, it can be hard to separate those variables.
Self-selection, the authors write, is “a confounding factor.”
How
might things be changing today, with homeowners under duress and a whole
new class of former and future owners thrust into the rental market?
Back in Philly, a recent
survey of
renters conducted by the city found unexpected levels of social
engagement. Planners were surprised by how many renters knew their
neighbors, participated in neighborhood events and helped maintain the
physical environment through volunteer work.
Philadelphia,
however, despite the recent shift toward a renter city, is still more
than half homeowners. Of the country’s 10 largest cities, most (running
across typical urban typologies) have
higher percentages of renters: Los
Angeles, Chicago, Houston, San Diego and Dallas all have lower home ownership rates than Philly. Nearly seven in 10 New York City units
are rented. How does NYC maintain any semblance of community with such a
large population of “transient” neighbors? Rent control and
stabilization, which cover 1 million New York City apartments.
Most
economists don’t like rent-control programs, arguing that they harm the
housing stock and drive up prices for newcomers. But a city with
rents rising just as rapidly as the renter population risks
becoming a kind of deck of cards, shuffled every 12 months when leases
expire and landlords target a new stratum of the population.
Unfortunately, that’s now a description that could apply to a number of
American cities – not just San Francisco and Boston. Even in Houston,
famous for its low cost of housing, rent is rising at a
record rate. Evictions are
up 43 percent in Milwaukee since 2010.
Cities like Philadelphia have already
cut property taxes to
help longtime homeowners (who, by the way, stand to make a windfall off
gentrification) stay put in their neighborhoods. But help for renters
remains politically charged, in part because renting is still seen as a
transitory stage — a life-step to be tolerated but not encouraged.
But this is not a universal perspective. In Germany, for example,
renting is the norm —
and people are quite happy with the situation. France, Switzerland,
Denmark, Austria and the Netherlands have similar renter-owner
breakdowns.
Is America moving in that direction? If so, it’s worth
asking ourselves why we’d rather not have renters for neighbors — and
in the cases where there’s some truth to the stereotype, what we can do
about it.
