Rentals threaten American Dream of home ownership

Younger generations slower to lay down long-term roots.

A decade ago, when 5,000 settlers a month were arriving in this valley, the suburban frontier moved out into the desert so fast the ZIP codes couldn’t keep up.

Then came the financial crisis, and the frontier stopped at places such as the back fence of 4132 Recktenwall Ave. The four-bedroom house there, meant to be owned by its residents, is a rental. And the Severance family, meant to be owners, are its $1,365-amonth renters.

It’s all part of a national shift away from homeownership and toward renting. The U.S. homeownership rate peaked 10 years ago. Since then, it has dropped from more than 69% to less than 64%, where it was a half-century ago. Each percentage point represents more than a million households.

An Urban Institute study this year predicted that in 15 years, the homeowning rate will sink to 61%. Baby Boomers — far more apt to own than members of succeeding generations — will move or die. Millennials, 18 to 34, will be slow to own, either because they can’t afford to or don’t want to.

The shift to rental in single family homes is visible on streets such as Recktenwall. From 2005 to 2009, about 80% of such houses in greater Las Vegas were owner-occupied; by 2013, that had dropped to 71%, a 12,000 unit shift.

Nationally, the number of single-family detached house rentals increased by 3.2 million from 2004 to 2013, according to Harvard’s Center for Housing Studies.

The Severances lost their first house to foreclosure in 2009, and haven’t been able to buy another. Bryan Severance, 37, admits this rental is OK for his family of six, “but it’s not ours. There’s something about owning your own home.’’

THE DEMISE OF THE DREAM?

America, we’ve long told ourselves, is a nation of homeowners. It’s part of our national credo: A family that owns its home cares for it and improves it, luxuriates in its memories and profits from its sale.

Now this most tangible measure of the American Dream is in doubt.

Consider the Millennials. Although a MacArthur Foundation survey this year found that 88% aspire to own a home, and 53% say it’s a high personal priority, relatively few follow through.

Homeownership among households headed by those 30 to 34, which was above 50% for decades, is at a record low 45%. The first-time home buyer’s median age, once under 30, is almost 33.

Millennials face many economic barriers, including student loan debt, income stagnation and tighter credit rules imposed after the housing crash of 2007-08 and attendant subprime loan scandal. All inhibit either the ability to save for a down payment or to secure the mortgage financing used by most home buyers.

Rents are rising, creating unprecedented burdens in many regions. That should encourage people to buy homes, but it also eats away over time at the savings needed to do so.

Homeownership, once akin to Mom and apple pie, has become the subject of a policy debate.

Advocates say it’s a bedrock of middle-class prosperity and cite research showing that owners take better care of the property and are more civically engaged than renters.

No one opposes single-family homeownership per se. But Christopher Leinberger, a developer, researcher and writer, says many Americans want to live in more compact neighborhoods closer to mass transit and less dependent on cars. Such precincts traditionally have had more renters than owners.

A POSTWAR HOUSING BOOM

Homeownership was not always the American dream. It didn’t become a widespread aspiration until the 1920s, or a practicality for most until after World War II, when mortgage aid for veterans and construction of interstate highways helped push the ownership rate over 50%.

Every postwar president embraced the ownership dream, none more enthusiastically than Bill Clinton and George W. Bush.

Concerned with disadvantaged minority groups’ lag in homeownership, both promoted policies, such as tax credits and easier mortgage terms for first-time buyers, that helped homeownership rise to record levels.

Too many loans to people with no ability or inclination to pay them off helped create a financial bubble, which burst with disastrous results for the economy.

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