Cornhusker Economics April 15, 2016Rural Housing and Age Structure: Will an Aging Population Lead to a Housing Surplus?
Availability of and access to housing tend to rank high among the issues that rural communities cite as factors in their economic development plans. Lack of available homes that would be both acceptable and affordable for new residents is argued to limit the ability of rural places to attract much needed young workers and their families. There is much less agreement on how housing issues can actually be addressed at the local level.
Here we will consider the current profile of rural housing conditions for counties of various population sizes1 in non-Metropolitan Nebraska. Occupant demographics will also be considered in an effort to better understand the likely role of housing in rural development efforts.
As demonstrated in Figure 1, occupancy rates actually decline as places become more rural. In fact, in Nebraska’s most rural (frontier) counties, 23% of all housing units are estimated to have been unoccupied in 2014. This does not, however, mean that they are available. A residence can be unoccupied because it is for sale, for rent, reserved for seasonal or recreational use or “other,” which tends to mean abandoned. Only two of those things imply availability. Still, based on occupancy rates, it becomes more difficult to find an empty residence as places urbanize.
As depicted in Figure 2, a significant characteristic of Nebraska’s housing is that it, much like the population, is relatively oldest in rural areas. It is argued that the expense of new construction to meet modern housing preferences cannot be recouped in rural locations, with the result that such construction is rare when compared to that found in more urban areas.
Indeed, new housing construction in Nebraska is heavily skewed toward Metropolitan areas in the same way as population growth. According to estimates from the American Community Survey, Nebraska saw an increase of 17,348 residential units between 2010 and 2014, with 91 percent of that increase located in the state’s ten Metropolitan counties. The three Metropolitan core counties (Douglas, Hall and Lancaster) accounted for 84 percent of the increase. Over the same period, the 28 most rural counties in Nebraska saw their housing stock decline by 163 units, or just under 6 percent.
Decades of this bias in new construction has left all of non-Metro Nebraska with housing stock that is, in the majority, more than 50 years old. Interestingly, the size of residence doesn’t vary much between places, with the median number of rooms ranging from 5.5 to 6.5 virtually everywhere.
So, rural housing is relatively older and has relatively lower occupancy rates than is found in more urban locations. Who, then, lives in these places? The answer, as one would expect, is relatively older people. Figure 3 shows that in 2010 fully 60 percent of all occupied housing in Nebraska’s most rural counties included a householder age 55 or older, and nearly 38 percent included a householder over the age of 65.
If the baby boom is considered to include people born between 1945 and 1965, then all of this housing was occupied by people of the baby boom generation or older. Census data indicate that by age 85, housing occupancy has declined to 5 percent or less of the total. Thus, it appears inevitable that as much as one-third of all rural housing will find its way into the market as either sale or rental property over the next 20 years.
A look at demographic trends may provide insight into who is likely to provide a market for those residences. In this case, we will concentrate on those counties classified as “Small Town Counties.” These are counties that include no community as large as 2,500. In 2010 there were 22 such counties.
The in-migration of people between the ages of 30 and 39 in such counties was documented in a previous edition of Cornhusker Economics. That paper utilized a simplified cohort analysis of migration patterns, comparing “expected” and “observed” populations for five-year age groups. Using 2000 Census counts as a baseline, we start with the assumption that nothing changed over the next decade. That is, if one found 100 residents between the ages of 20 and 24 in a given location in the year 2000 and neither death nor migration affected that population, we would expect to find 100 residents between the ages of 30 and 34 in that same location in the year 2010. Any variation from that expected outcome (for residents who were more than 10 years old in 2000) can only be explained by migration or death. Cohorts in 2010 that are smaller than expected are explained as net out-migration (and to a lesser extent death), while cohorts that are larger than expected are explained as net in-migration. Figure 4 depicts those data for the group of Small Town Counties. Bars to the left of the 0.0 line represent out-migration. Bars to the right represent in-migration and the numbers represent percentage variation from an expected (unchanged) population.
If recent migration trends continue, these data provide a clue as to who might be in the market for rural housing as it becomes available. Figure 4 depicts the out-migration of young adults, beginning immediately following high school. More than half (-58.1 percent) of the of residents age 15 to 19 years in the year 2000 had left their communities by 2010. That high level of out-migration is also seen for the age group 25 to 29 years (-45.3 percent). However, not everyone leaves. Those young people who reach adulthood and remain in their rural communities provide one potential source of home buyers or renters.
This class of counties also experienced significant in-migration beginning at around age 30, and the population collectively was home to nearly 25 percent more than the expected number of 30 to 34-year-old residents in 2010. This rural in-migration of working age adults and families provides a second potential source of home buyers and renters. The demographic problem for Nebraska’s 74 most rural counties is that the in-migration of people in their 30s and early 40s is sufficient to replace only about 5 percent of the population lost to out-migration following high school.
People in the age group that are most often moving to rural places today were born between 1980 and 1985, the front end of a generation commonly referred to as “Millennials.” Their housing preferences will be important in determining the marketability of rural housing stock.
Differences in cohort behavior is the subject of an entire genre of literature, much of it purporting to explain what different cohorts want out of life. In that literature, the characterization of Millennials that seems to have stuck is that of a “Me” generation (Twenge, 2006). The cohort, which was then entering their 20s, tended to be described as narcissistic, entitled and wealth oriented. Problems with stereotypes notwithstanding, the extent to which that is true may have a significant role to play in the residential and housing preferences of what is now becoming a population in their prime earning years. Since they are generally better educated and thus presumably more productive than previous cohorts, attracting Millennials to rural areas is likely to be critical to maintaining a viable rural labor force. Housing will be an important part of that effort.
Communities concerned that the condition of their housing stock may limit their ability to attract new residents in their early and mid-careers are experimenting with a number of options to improve the situation. One is to simply remove the least desirable units from the market. Indeed, 43 Nebraska counties saw their total housing stock decline by a total of 594 units, ranging from as few as one to as many as 72 units. Some of these structures would have been removed by communities that had declared them to be uninhabitable, while others were most likely removed to clear the way for agricultural activity. Data regarding how housing units are removed are unavailable. However, such activity should be observable locally.
A second possibility for improving housing options is to encourage new construction by providing free or subsidized lots, low interest loans, or even building community sponsored spec houses. However, new construction remains relatively low in rural places, as demonstrated earlier.
Communities have also experimented with subsidizing maintenance costs for senior residents, hoping to keep deferred maintenance from contributing to declines in housing quality. Others have pursued the construction of housing, generally multi-unit, specifically tailored to the needs of older residents, hoping to entice them out of their single family homes and thus making those homes available as housing for newcomers and young families.
Community amenities also play into residential decisions. Some communities are rethinking their recreational investments to better meet the activity preferences of younger cohorts. The ball diamond may well be of less interest than a fitness center for people who have become used to the availability of such facilities.
Broadband availability, generally seen as a tool for economic development, is proving to also be essential to the way in which 21st Century Nebraskans maintain their social networks and is likely to be as important to attracting new residents as it is to attracting new businesses.
All things considered, it is apparent that a good deal of rural housing is likely to become available over the next two decades, and it is likely to be more than sufficient to meet current levels of demand. That may actually prove to be advantageous in some locations as an oversupply of housing can be expected to drive housing costs down. We know from research conducted in Nebraska and the Dakotas that the expected lower cost of rural housing is often noted to have been instrumental in household decisions to relocate to rural areas (Vogt, et.al., 2011).
The deciding factor in the future of the rural housing market is likely to come down to the residential preference of the “Me “generation. With all due respect to Dr. Twenge and her colleagues who coined that term a decade ago, that was then and this is now. The intervening ten years have seen the Millennial generation reach adulthood, begin families and enter careers. They are likely to be motivated by the same rural amenities that have attracted previous cohorts to rural areas: a slower pace of life, more time with family, less time commuting and, yes, lower housing costs (Vogt, et.al., 2011). If that is true, while not necessarily signaling a rural rebirth, continued in-migration of people in their thirties should provide a market for much of the housing currently occupied by the baby boom generation. However, if their choices are indeed driven by consumerism and personal gain the future for rural places may well be one of labor shortages and housing surpluses.
Rural Futures Institute
University of Nebraska-Lincoln
Bureau of the Census: Decennial Census, 2000 and 2010; American Community Survey, 5-Year Estimates. Both retrieved from American Fact Finder http://factfinder.census.gov/faces/nav/jsf/pages/index.xhtml
Twenge, Ph.D., Jean (2006). Generation Me. New York, NY: Free Press (Simon & Schuster).
Vogt, Rebecca, C. Burkhart-Kriesel, R. Cantrell, C. Narjes. Attracting and Retaining Workers in Rural Areas, in Cornhusker Economics, May 12, 2010. Data Warehouse