New Geography

Author: Morley Winograd

  • A Truly Historic Super Tuesday

    This year’s Super Tuesday primaries will give both parties a chance to decide which of their candidates offers the best policy prescriptions to address the nation’s challenges.  Surprisingly for a campaign that is supposedly focused on America’s future, many of the ideas being proposed echo proposals from America’s past.  It’s almost as if the ghosts of not just Ronald Reagan, but Huey Long, William Jennings Bryan, and Norman Thomas have come back to haunt us, making this one of the scariest presidential campaign seasons in recent memory.

    For GOP, it’s Reincarnation of Long vs.  Descendant of Bryan vs. Children of Reagan

    Donald Trump is basking in the popularity of his ideas on how to improve the economic and social standing of America’s beleaguered middle and working classes. He hasn’t offered many specific proposals on how to do that but, unlike his Republican opponents, he doesn’t reject big government solutions, such as preserving Medicare and exercising the right of eminent domain, out of hand. In the 1930s, Huey Long’s populist “Share our Wealth” campaign promised to give away government money to poor people. Overseas, European dictators of that era proposed what they called “National Socialism” or “Fascism,” which made scapegoats of certain portions of their country’s population while promising economic benefits to the rest of the population. Underlying all of these movements was a promise to make their particular country—Germany, Italy, Spain, even Argentina, as captured in the musical Evita—in Donald Trump’s words, “great again.”

    Huey Long was assassinated in 1935 before he could launch his national campaign against FDR’s New Deal, but no one at the time doubted the power of his ideas to generate support from an economically struggling and culturally-alienated demographic. By pitting the interests of working class, less educated voters against those in the establishment, while calling for the expulsion of those who he and many others blame or the country’s economic ills, Trump has managed to gain the enthusiastic and boisterous support of a slice of the electorate–white voters with less than a college education—that is in the final stages of its long slow journey from being the backbone of FDR’s coalition to becoming a critical part of the Republican party’s base.   

    Ted Cruz on the other hand is offering a “true conservative” civic ethos that harkens back to previous Republican party platforms–starting in the 1890s with William McKinley and continuing all the way through Herbert Hoover’s disastrous 1932 campaign.  What Senator Cruz has added to this position of minimal federal economic involvement is a religiously-driven, doctrinaire approach to social issues. Cruz’s unrelenting hostility to non-believers of various types is reminiscent of the attitudes that Williams Jennings Bryan brought to his three political defeats as the Democratic candidate in 1896, 1900 and 1908 and to his Bible-based defense in the 1920s of a law forbidding the teaching of Darwin’s Theory of Evolution in Tennessee public schools.

    The establishment wing’s candidates—Marco Rubio and John Kasich—are proposing the country go back only as far as the Reagan-era formula of reducing the economic role of government, while give lip service to the concerns of the aggrieved, but fading, religious right.    Rubio calling his followers “children of the Reagan revolution”   at least reflects nostalgia for the late 20th Century rather than Trump’s stumping for the neo30s or Cruz’s bridge to the religious passions of the 17th Century. Both of them, to their credit, have also tried to adopt the sunnier tone of the former President in their rhetoric in a year when fear, uncertainty and doubt permeate the media.  Governor Kasich has gone so far as to follow Reagan’s 11th commandment that thou shall not speak ill of other Republicans in a year when personal insults seem to be the ticket to stardom.

    We will have a good idea after Super Tuesday which of these candidates are likely to be the party’s nominee and whose approach to the role of the federal government in today’s society will become the centerpiece of the Republican Party’s platform this year. Whether any of these somewhat old ideas will resonate with a 21st Century electorate, however, remains to be determined in November. 

    In the Democrat’s Debate, it’s the Ghost of Norman Thomas vs. a Replica of President Obama

    Bernie Sanders has suggested on more than one occasion that his campaign’s economic and political message is a throwback to FDR’s New Deal.  What he fails to mention is that his democratic socialist ideas were explicitly rejected by the American public in both 1932 and 1936, even in the midst of a Great Depression, when the GI Generation overwhelmingly supported FDR and not Norman Thomas, the Socialist Party’s nominee. Still, after the Great Recession and the illegal behavior of Wall Street firms and their leaders, it is not hard to understand why Sanders’ call for a “political revolution” to put the government in charge of ensuring economic equality finds such enthusiastic support from Millennials, a generation that is coming into its own political power eighty years after the last previous civic-oriented generation, the GI Generation, which restrained the economic oligarchs of its day.

    By contrast, Hillary Clinton is explicitly campaigning on the need to “build upon,” and thereby ratify, the new civic ethos that President Obama has introduced into the country’s political debate. Rejecting Sanders’ premise that all of America’s problems are rooted in economics, she has taken a less sexy, but thoroughly modern pragmatic approach, reminiscent of her husband and President  Obama — but without the soaring rhetoric and charisma.

    For example, by attacking Sanders’ proposal for “Medicare for all” in favor of continuing to make progress on universal health care through the framework of the Affordable Care Act (ObamaCare), she also directly addresses Obama’s vision of a new role for the federal government. In this 21st Century approach to the relationship between the government and its citizens, the federal government uses the power of taxation granted to it in the original Constitution to compel individual behavior, e.g. buying health insurance, but individuals have the responsibility to undertake such activities, preferably with the aid of their state government.

    In our country’s past, each time the debate over the relationship between citizens and their government has reached fever pitch, visionary leaders have come forward to persuade the populace that revolution was not the answer. The Founding Fathers convinced the rest of the country in the wisdom of their Constitutional formulation after about a decade of debate. Lincoln could not convince the entire country of his vision of equal rights without a war, but his ideas ultimately prevailed. FDR’s political skills enabled him to lead the country away from its economic fears to a new conception of how government could provide for “the common man.” Each in his own way, and in the context of their times, found a way to preserve the unique nature of our American democracy.

    Washington, Lincoln and FDR articulated a new conception of America’s exceptional ability to reconcile its eternally conflicting desires for both individual liberty and collective action in ways that won them the enduring appreciation of a nation and the praise of presidential historians. This year’s crop of candidates —including the likely winner Secretary Clinton — has yet to offer such a grand vision or earn such affection. Instead, the campaign has seemed to be more like a series of clowns jumping out of a jack-in-the-box, shouting slogans from America’s past, just to frighten us. But, in a year filled with political unpredictability, perhaps one of the candidates will surprise us one more time and demonstrate the ability to persuade the country to endorse his or her vision of how to organize ourselves in the 21st century in ways that preserve our American democracy for decades to come.

    Morley Winograd is co-author of the newly published Millennial Momentum: How a New Generation is Remaking America and Millennial Makeover: MySpace, YouTube, and the Future of American Politics and fellow of NDN and the New Policy Institute.

    Photo by Gage Skidmore [CC BY-SA 3.0], via Wikimedia Commons

  • Hurdling the Obstacles to Millennial Home Ownership

    Justin Chapman contributed research and editorial assistance to this piece. This essay is part of a new report from the Center for Opportunity Urbanism called “America’s Housing Crisis.” The report contains several essays about the future of housing from various perspectives. Follow this link to download the full report (pdf).

    If the United States could remove current obstacles holding back members of the Millennial Generation from owning homes, the value of the housing market would increase by at least one trillion dollars over the next five years. Policies that would eliminate or sharply reduce financial obstacles that are currently hindering thirty somethings who want to start raising a family in the suburbs from buying a home would enable the construction and sale of as many as five million more homes between now and 2020. Residential investment represents about five percent of the country’s GDP, not counting the ancillary spending that results from such purchase. So any sound housing policy for the United States should begin and end with programs that allow these “missing Millennials” to join the ranks of America’s home owners.

    HOW WE ARE FAILING  THE NEXT GENERATION… AND OURSELVES

    The Millennial Generation (born 1982–2003), is made up of about 95 million Americans, most of whom are now in their twenties or thirties. They have been raised to think of life as a series of hurdles to be jumped with each obstacle becoming increasingly more difficult to overcome. Part of this mentality stems from the sheer size of the generation, which created enormous peer competition for success in school. Another source of this pressure to achieve came from their parents, who constantly
    emphasized the importance of going to college, doing extracurricular work in high school to improve the chances of being selected to attend the college of their choice, and spending time studying, not working, to make sure their grades were good enough. This kitchen table conversation was at least partially generated by the pressure that an increasingly global economy put on family incomes as they were growing up, with particular urgency after the Great Recession.

    Despite the investment in education the generation has made  in response to these pressures, the question remains as to whether or not Millennials will be able to fully participate in the experience of home ownership. The answer to this question will be determined both by the efforts of Millennials and also to the degree that efforts to lower the height of the hurdles in front of them are successful.

    There are some people, such as Brookings Institute researcher Matthew Chingos, who don’t believe the hurdles are unique to this generation. He has suggested, for instance, that student debt loads weren’t high enough to really impact the housing market.iv, John McManus, an award-winning editorial and digital content director for Builder magazine, suggested any delays in home ownership were due primarily to the inherent desire to wait before making decisions in the hope something better will turn up.vi Despite evidence
    of mounting student debt, declines in workforce participation, and stagnant wages, these economists believe the housing issue can solve itself within the context of existing policies and current economic growth rates.

    Yet from the perspective of most young Millennials these hurdles are both very real and huge indeed. Not addressing them will impact their lives—and the nation’s economy—for decades to come.

    LOVE AND MARRIAGE: MILLENNIAL STYLE

    From 1920 to 1940, when members of the GI Generation were about the age that Millennials are today, the median age for a first marriage was 24.4 for males and 21.3 for females, numbers that remained fairly constant until the 1980s. In the 1990s, the median age for first marriages by Generation X males rose to 26.5 and 24.5 for females.

    The early marriage age in the 50s and 60s sparked a rapid growth in suburbs; the percentage of Americans living there doubled after World War II. By 1970, 38 percent of Americans lived in the suburbs and, by 1980, 45 percent did, triple the rate of suburban home ownership than before WWII. As of 2012, nearly 75 percent of metropolitan area residents live in suburban areas. Overall, 44 million Americans live in the core cities of America’s 51 major metropolitan areas; more than half of them live in areas that are functionally suburban or exurban with low density and high automobile use. Meanwhile, nearly 122 million Americans live in the suburbs.

    Will Millennials reverse this pattern? Clearly they are marrying even later: the average age of first marriage in the United States as of 2011 was 28.7 for men and 26.5 for women. This trend has caused more to linger longer in cities and postpone home ownership until much later in their lives. Furthermore,  in line with their more urban existence,
    the fertility rate has fallen from the replacement rate of 2.1 for Generation X to 1.9 for Millennials.

    But this doesn’t mean Millennials aren’t interested in starting a family later in life.

    A Pew Research Center report found that among those who have never married and have no children, 66 percent wanted to marry and 73 percent wanted to have children. Although they may be late to the family party, the large size of the Millennial Generation, almost double that of Xers, means there are still plenty of families being formed, just not at the rate that historical precedents suggested would happen. In fact, the absolute number of household formations rose to their highest level in a decade in 2014. The trend continued in 2015 as more and more Millennials entered the prime age for getting married.

    These Millennial trends in marriage and parenting can be explained, in part, by the impact of the Great Recession and more than a decade of stagnant wages. But they are also due to “cultural changes over time… including more women in the workplace, the increased amount of higher education among members of the generation, particularly females, and greater social acceptance of premarital sex, birth control, and cohabitation before marriage,” according to Christine Elliott and Williams Reynolds III of Deloitte University Press.xv For example, one of the reasons members of the Silent Generation got married so young in the 1960s was so they could have socially acceptable sex. No such incentives exist for members of the Millennial Generation.

    Liberated from the straight jacket of gender determined roles in society, female Millennials now outnumber men in every type of higher educational pursuit. Almost 40 percent of female Millennials aged 25–34 have a bachelor’s degree and about half of them are married, a greater percentage than among any other educational attainment cohort. Whereas few if any female 25–34 year  olds had attended graduate school in 1964, 13 percent of Millennial females of that age have reached that milestone today. All of these gains outpace college educational gains among males in the same time period.

    Source:www.whitehouse.gov/sites/default/files/docs/millennials_report.pdf

    Millennial women who are not as well educatedxvi and do not have any economic stake in pursuing a career have their first babies, on average, at age 19 or 20. Well-educated moms have their first child around 28 or 29, usually after they have saved some money from their participation in the workforce. The delay in childbearing is greatest among those women with graduate degrees. Their average age for having their first child is now over 31, a full decade longer than their counterparts with only a high school degree. This represents a remarkable reversal of earlier trends over the last 25 years when more educated women were more likely to have children earlier than their less well-educated peers. In all likelihood, this phenomenon represents another kitchen table conversation about family finances with more educated females having more to lose by stepping out of the workforce and their preferred career track by having a baby than their less educated counterparts.

    In a sense, the cultural changes that society has witnessed, driven by a new set of Millennial beliefs and values about the role of women in society, has run up against the realities of today’s economy. The best solution to overcoming this obstacle would be a growing economy with wages increasing comparable to what transpired in the 1990s. Expanded parental leave policies from companies such as Facebook and Netflix introduced for both their male and female employees might also impact this trend, or at least the timing of starting a family. Other solutions designed to artificially increase wages or provide tax incentives are much less likely to overcome the strong cultural trends impacting family formation that are embedded within the Millennial psyche.

    MILLENNIALS WANT A PIECE OF THE AMERICAN DREAM, IF ONLY THEY COULD AFFORD IT

    Not only when they marry but also where these new families choose to reside will have an enormous impact on American living patterns for decades to come. Despite what some of have written about Millennials being a “sharing generation” averse to owning things, the generation’s actual attitudes or aspirations toward home ownership are remarkably similar to those of previous generations. An Urban Land Institute study, conducted at the end of 2014 of Americans between 19 and 36 years of age, found that Millennials remained determined to eventually own their home, with 70 percent of them planning to do so by 2020. “The Great Recession has not dimmed the generation’s preference for single-family homes, mostly detached,” wrote Leanne Lachman, the survey’s co-author, a real estate consultant and a Columbia Business School executive in residence, in a report outlining the survey’s findings.

    The same percentage of renters as home owners in the New York Federal Reserve’s Survey of Consumer Expectations in February 2014 thought home ownership was a good or very good investment. Almost 65% of millennials aged 21 to 34 looked at real estate websites and apps in August, and the market share of first time home buyers of existing homes increased to 32 percent from 28 percent in July of the same year. Realtor.com’s chief economist, Jonathan Smoke, found that 25–34 year olds were 70 percent more likely than the average adult to be looking for a home to buy on realtor.com. He estimated half of all home sales activity for the first half of 2015 could be attributed to first-time buyers and, according to the NAR 2015 Home Buyer and Seller Generational Trends report, Millennials comprised 68 percent of all such buyers.

    “People who believe that Millennials are disinterested in home ownership are grossly mistaken,” said Smoke. “This generation hit the job market during one of the largest recessions of all time and
    they’ve had to work hard to establish credit and save for a down payment.”

    One solution for Millennial couples unable to qualify for a mortgage is, of course, to rent a course of action many young families just starting out in life have traditionally pursued. The New York Federal Reserve study found the number one reason renters gave for not buying a home was they didn’t have enough money saved for a down payment or had too much debt. A majority also reported that their incomes were too low to support the payments on a mortgage. These responses nicely summarize the economic barriers to Millennial home ownership. As a result, the typical first-time home buyer now rents for six years before buying, up from 2.6 years in the early 1970s, according to a new analysis by Zillow. The median first-time buyer is 33—in the upper range of the Millennial generation, which roughly spans ages 15 to 34. A generation ago, the median first-time buyer was about three years younger.

    Ironically, many Millennials are being pushed into the home buying market by continuously rising rents that are making all forms of housing increasingly unaffordable. As Svenja Gudell pointed out, “We’re also finding that—given how much rental rates are currently rising—a lot of folks are having a hard time saving for a down payment and qualifying for a mortgage.” The oft violated rule of thumb says that families should not spend more than 30 percent of their budget on housing costs. But many young renters are paying more than that. “A striking 46 percent of renters ages 25 to 34—the core of the home buyer market among Millennials—spend more than 30 percent of their incomes on rent, up from 40 percent a decade earlier,” according to a report by Harvard University’s Joint Center of Housing Studies.

    Along the coast, in cities such as San Francisco, Los Angeles, New York, or Miami, rental costs exceed 40 percent of Millennials’ median income, with many paying as much as half of their budget on rent. A minimum wage worker in Orange County, Southern California’s most desirable suburban environment, would have to work 110 hours per week or over 15 hours a day to afford a one bedroom apartment where he or she worked. Inland, in cities such as Dallas, Houston, Chicago, and D.C., Millennials are spending just about 30 percent of their median income on rent. And the situation continues to worsen.

    More striking than these regional differences is the new relationship between the costs of renting versus owning a place to live. By the fourth quarter of 2014, the average mortgage cost was just 21 percent of average household income in the Dallas area, compared to an average of 28.5 percent of a family’s income being spent on rent. Across the country, it has become less costly on average for Millennials to own a home (21.4% of income) than to rent (30.1%).

    MILLENNIALS TRYING TO BUY HOMES

    For those who decide to take the plunge and buy a house, the tighter mortgage-qualification standards put in place after the Great Recession in reaction to the collapse of the financial markets when collateralized debt obligations (CDO) supposedly backed by sound mortgages turned out not to be worth the computer screens they popped up on present the first hurdle to their goal. To prevent such disasters in the future, Fannie Mae, whose reinsurance programs set the boundaries of risk that mortgage lenders will tolerate, prohibited certain types of mortgages altogether and emphasized a return to the traditional 20 percent down, thirty year term, fixed rate mortgages that had become the standard lending instrument when they were created to revive the nation’s housing market after the Great Depression.

    For a generation that has experienced falling wages and high levels of unemployment, this requirement can be seen as just too high a hurdle to even attempt to jump. Even if they can scrape up the money for the down payment, two-thirds of Millennials have a FICO score of under 680, limiting their ability to secure a government guaranteed mortgage and often saddling them with additional payments. Andrew Jennings, senior vice president and chief analytics officer at FICO said that “people in the 600 to 700 [credit score] range average have $25,000 in non-mortgage debt mostly from credit cards and student loans.” He pointed out that changes to the FICO score would make it easier for young adults with a thin credit history to qualify for a home loan. “One way to ease some households into ownership is to ease access to credit.”

    Fannie Mae’s Community Home Buyer program takes a step in that direction by lowering the down payment requirement for qualified buyers to just 5 percent. North Carolina and New Hampshire have also introduced programs that lower down payment requirements to 3 percent in an attempt to woo Millennials into buying a home in their state.xxviii More of these programs should be enacted to knock down this particular hurdle facing Millennials.



    (chart:  https://www.whitehouse.gov/sites/default/files/ docs/millennials_report.pdf)

    Much of their lack of credit worthiness stems from the lousy economic environment Millennials have experienced as they grew up.
    Americans between 18 and 34 years of age are earning less today than the same age group did in the past. The average earning of a Millennial was $33,883 (in 2013 dollars) in the four years following the recession. This represented a drop in average wages of 9.3 percent in just a decade (after adjusting for inflation) and is the lowest average wage for this age group since 1980. According to Rob Shapiro, a noted economic policy analyst, annual income gains for thirty something households (headed by Boomers) averaged 2.6 percent under Reagan and 2.4 percent under Clinton. Similarly aged households headed by members of Generation X under George W. Bush experienced income losses averaging 0.3 percent per year, followed by even greater losses averaging 1.8 percent per year among the first wave of Millennials in Obama’s first term.

    The situation is even worse for those with only a high school education. In a report written for the Brookings Institute in 2015, Shapiro showed that in the last century those with a high school education could expect their income to grow as they got older, even if it started from a lower base. This is no longer the case. In this century, those with only a high school education have actually experienced a drop in their earnings as they got older. Meanwhile, those with a college education not only start with an initially higher level of income, they can also expect to see their earnings grow in the course of their lives. College has become the ultimate hurdle in a Millennial’s life, with failure to get a degree becoming a life sentence of lower economic opportunity.

    The part about going to college that most parents worry about is not so much whether or not their child will get in and graduate, but how in the world they or their children will be able to afford to pay for their tuition bills. From 1980 to 2010 the price of tuition skyrocketed by 600 percent. In the same period, health care inflation rose by just over 200 percent. Meanwhile incomes for all but the top 5 percent of earners remained basically flat.

    In many ways this crisis has been precipitated by the unwillingness or inability of government to absorb much of the burden for higher education. This follows a notion introduced by the Carnegie Commission in the 1970s that an educated workforce was not an investment that government alone should pay for, despite its proven benefits in expanding the middle class and the country’s economy. Most people agreed with the report’s argument that those who would benefit most directly from acquiring some sort of a degree—the student and their family—should pay an increasingly large share of its cost.

    Coupled with the inability of states, particularly after the Great Recession, to subsidize the cost of college at historical levels, this policy led to families in 2014 shouldering the majority of the cost of sending their child to college for the first time in the nation’s history. Overall, the share of higher education costs paid for by students and families increased from 33 percent in 1977 to just under 50 percent in 2015.

    Faced with the need to somehow pay for school, students and their families turned to student loans as the default solution. The result has been a disaster for them and for the American economy, particularly its housing industry.

    Student loan debt doubled from 2007 to 2015. It now exceeds $1.2 trillion in the United States, more than the country has borrowed to pay for all the cars on the road today. The average debt for a college graduate in 2015 was $35,000. Eight million former college students are now in default on their student loan debt with no way to discharge that obligation in bankruptcy. Only 49 percent of Millennials manage to graduate college with less than $10,000 in debt, a major shift from the 74 percent of the Baby Boomer generation who were able to do so. According to a recent iQuantifi study, Millennials aged 21-25 shoulder an average of $13,116 in debt. Millennials in their late 20s carry $46,622 and Millennials in their 30s harbor an average of $69,552. All of this presents an enormous headwind that the first time home buyer must overcome.

    Under these circumstances, the clearest, most compelling action to grow the housing market would be to do something about Millennials’ student debt. A staggering 56 percent of Millennials between the ages of 18 and 29 who have student loan debt told Bankrate. com that they have delayed major life events because of their debt burden, with home buying the number one thing they have put off doing. Thirty percent of millennials (versus 22% of adults overall) say that student loans have forced them to delay buying a home.

    To make it easier for Millennials to leap the other hurdles to home ownership without the deadweight of student debt on their back, some have proposed to go so far as to declare a “jubilee year” and have the nation simply forgive the $1.2 billion in outstanding student loan debt. Home developers might well be a major beneficiary of such a windfall, although bailout of student loan debt at this scale is unlikely to occur any time soon for both financial and political reasons.

    A smaller and more personal solution to the problem is offered by the Public Service Loan Forgiveness program. It allows students to have their loans forgiven if they work for government or for certain not-for-profit organizations. Unfortunately, the time period under which a person must serve—ten years for the federal government, for instance— makes the actual impact of this law seem
    more like indentured servitude to those working under its provisions.

    Other solutions also exist or are under discussion. The Obama administration has greatly expanded eligibility for “income based repayment” (IBR) loans, which limit annual loan payments to a specified percentage of a person’s income, usually ten percent, and are forgiven even if the debt is not fully repaid after 20 to 25 years of payments depending on the particular terms of the original student loan. Some have proposed making IBR loans the standard for all federally guaranteed student loans, while others believe they represent too much risk for the federal government to undertake. Even if this type of loan becomes more prevalent among future home buyers, it still would mean lenders would have to take ten percent of a prospective home buyer’s income off the table when it comes to determining the buyers’ qualifications for a mortgage, thereby lowering the value of a home the buyer might consider.

    Some presidential candidates have joined the chorus in favor of allowing student loans to be refinanced, just as many people do with their home loans. About 25 million borrowers are estimated to be locked into higher rates that student loans require today. For these borrowers, such a plan, which many states have also started to explore, would reduce their loan payments by thousands of dollars early in their careers, making it more financially feasible for them to consider taking out a mortgage to buy a house.

    The states of Tennessee and Oregon have gone one step further in terms of reducing the scope of this problem in the future. The Republican governor in one state and the Democratic legislature in the other enacted laws that make their community colleges tuition-free. President Obama has proposed doing the same thing for all the nation’s community colleges in partnership with the states. Other communities from Kalamazoo, MI, to El Dorado, AR, have used personal or corporate philanthropy to make all levels of college tuition-free for their high school graduates. The idea continues to spread since the initial program was established in 2005 in Kalamazoo with over 30 cities now offering some form of this benefit to their youth in the hope of increasing the number of families who want to live in their community and stimulating their local economies.

    More directly, new home developers and lenders could begin to accept student loans as a fact of life for the Millennial market, and generate innovative new offerings to address the issue. One idea is to rent a home to Millennials under terms that lower the price if they elect to buy it  in the future, just as is done with many  car leases today. One such experiment is being offered in Miami for two unit town houses whose sales price is 21 percent lower than it would be otherwise. Another would be to find lenders willing to consolidate student debt into a larger home mortgage, with the lender trading the benefits of a loan not dischargeable in bankruptcy to a theoretically safer loan that uses the physical collateral of a house. Finally, builders and banks could take advantage of the Millennial Generation’s love of their parents and build housing designed not just for multi-generational living, but multi-generational financing, with different members of the family responsible for the mortgage payments at different times over the period of the loan.

    WHEN MILLENNIALS DO BUY, WHERE WILL THEY LIVE?

    Much has been written about where Millennials will buy a home. Some urbanists hope that Millennials will embrace the denser, less suburban lifestyle these pundits favor. Yet survey research and moves by older Millennials belie these assertions.

    According to the Urban Land Institute’s (ULI) most recent data, only 13 percent of Millennials live in or near downtowns; 63 percent live in other city neighborhoods or suburbs. The number of downtown dwellers was 12 percent in ULI’s 2010 survey. In fact, the Commerce Department reported that more Millennials moved to the suburbs from the city than vice versa in 2014. So even though some young Millennials, especially right after college, do move into urban neighborhoods, which certainly benefit temporarily from their presence, most think of the suburbs when their thoughts turn to raising a family.

    The National Association of Home Builders survey in January 2014 found that most of their Millennial respondents intended to purchase a single family home in the suburbs; another survey put the figure at 66 percent. Both studies confirmed the ULI findings that 75 percent of Millennials expected to live in a single family, detached house by the end of the decade. The myth of a new urban dwelling generation largely misreads the difference between “age related” effects and generational attitudes and beliefs.
    This misreading has impacted homebuilders who have built fewer homes that Millennials want and can afford, reducing the supply and driving up the price. The result is what economist Jed Kolko calls the “Millennial mismatch—Millennials can afford markets where they don’t live, but they can’t afford many of the markets where they do live.”

    (chart: Urban Land Institute’s Gen Y and Housing report, uli.org/wp-content/uploads/ULI-Documents/ Gen-Y-and-Housing.pdf)

    One way this lack of affordable housing manifests itself is the continuing phenomenon of Millennials living
    in their parents’ house. Despite their improving economic circumstances, a Pew Research Study found that about 42.2 million Millennials, or 67 percent, were living independently in 2014, compared with 42.7 million Millennials, or 71 percent, who did so before the recession in 2007. Since 2010, the percentage of Millennials moving back in with their parents actually increased from 24 percent to 26 percent.xlv While this behavior may temporarily balance the demand for housing with its supply, it greatly increases the number of Millennials missing from the country’s housing market.

    HOW TO GET MILLENNIALS BACK IN THE MARKET

    There are, however, some examples of what would attract these missing Millennials into the housing market. Almost all of them are successful because they have built upon the most fundamental of Millennial behaviors—the desire to share their experiences. And almost all of them make it possible for Millennials to afford a lifestyle they can share with families and friends.

    First on the frugal Millennial’s wish list is the need for the house to be affordable. According to a Rent.com survey of 1,000 Millennial renters, nearly half said they moved to a different city than the one they grew up in, mostly because of the job opportunities that city presented. Given the generation’s strong ties to their family and their friends, this finding puts an exclamation point on how important a consideration affordability is for Millennial first time home buyers.

    As Millennials continued to enter the housing market, their desire for a more affordable home became evident not just in survey data but actual buying behavior. For instance, 60 percent of those who  took out a mortgage to buy a home in August 2015 in Des Moines, Iowa were 25-34 years old. The top ten markets where Millennials dominated the home buying market that month were also ones with very affordable housing prices, with the exception of Provo, Utah. The cheapest big city in America in terms of housing prices, Pittsburgh, was the only one to make the list.

    Beyond a place they can afford, the
    next thing Millennials want is to own a home they can share with their family and friends. Millennials “want to live where it’s easy to have fun with friends and family, whether in the suburbs or closer in,” says M. Leanne Lachman, one of the authors of the Urban Land Institute’s study. “This is a generation that places a high value on work-life balance and flexibility. They will switch housing and jobs as frequently as necessary to improve their quality of life.”

    Only about 28 percent of Millennials told the Demand Institute’s Housing and Community Surveyxlix that they needed grocery stores and restaurants within walking distance of their next home, which is a common characteristic of urban environments. But more than half wanted such amenities to be within a short drive. This creates the demand for compact, livable communities that crop up in less-dense areas, but remain fundamentally suburban albeit with more options for walking, bike-riding and closer shopping. Unfortunately, these characteristics make many places in America, particularly its large coastal metropolitan areas, off limits to young Millennial families. It’s yet another hurdle they must overcome, often sacrificing their desire for shorter commutes to work and time with family to find a place to live that they can afford and safely raise their family.

    When they find the place they want to live, Millennials look for the type of housing that makes for a great living experience. It doesn’t have to be large—the most common size of a first time Millennial buyer’s home is less than 1,200 square feet. Half of all homes purchased by Millennials average less than 1,650 square feet and cost less than $148,500. But it does have to be high tech with an open floor plan, making many older homes unsuitable or strictly fixer uppers for this new generation of buyers. For instance, a generation ago, formal dining rooms may have been on every buyer’s wish list, but today they hold little appeal because of the way Millennials entertain. Millennials often convert space originally conceived as a dining room into a home office and move the food fest outside, weather permitting, or into the kitchen where the joys of cooking can be shared.

    A majority of Millennial home buyers believe the technological capabilities of a house are more important than “curb appeal.” More than 13 million Americans work from home and all signs point to that trend continuing, especially among high tech Millennial workers. Many of them see their home as a place to “do work,” not just a place to return “after work.” They want to hear about the strength of the mobile carrier’s signal in the house and its Internet speeds, not the embedded infrastructure of cable wires and land lines. Few if any of these desired attributes are present in older suburban tract housing, which further constrains the supply of houses for Millennials, presenting yet another obstacle in their path to home ownership.

    Breaking the current chicken and egg standoff between the demand and supply of Millennial style housing will require developers to stop listening to those who claim that Millennials aren’t interested in owning homes—or anything else—and focus on the market opportunity staring them in the face. Realtor.com’s chief economist Jonathan Smoke suggests that the supply of homes for Millennials is the key to igniting the next housing boom. “Despite the increased role of Millennials in the housing market, setbacks still exist and are preventing first timers from making even more of  an impact,” says Smoke. “As inventory returns to more normal levels, expect the blooming of Millennial homebuyers to turn into a boom.”

    Recent research from Zillow, for instance, found that adults age 22 to 34 were actually more eager to own a home than older Americans.lv If all the surveys of Millennial attitudes weren’t convincing enough, the actual home buying behavior of Millennials who can afford to buy a house should finally get builders off the investment fence. According to Zillow’s data, young married couples in which both partners work own homes at a rate close to or above historical norms for that demographic. Even single employed Millennials are slightly more likely to own a home than their counterparts in the 1970s, 1980s, or 1990s. All that’s needed, it would seem, to bring missing Millennials into the housing market is a larger supply of homes they want to buy. In short, build, builders, build.

    Home building, especially construction of single-family stand-alone residences, has not rebounded as much  as it should given the last few years of ultralow mortgage rates. For example, the number of single family housing starts and completions were both lower  in June than in May of 2015, even as family formations hit highs not seen in a decade. Both of the top two reasons older Millennials gave to realtor.com for not having bought a house yet had to do with the limited supply of affordable housing. It’s not up to Millennials to build the houses they want to buy, it’s up to those with the insights and market leadership skills to step in and create the supply and
    knock down this last hurdle to Millennial home ownership.

    MISSING  MILLENNIALS ARE A ONE TRILLION DOLLAR OPPORTUNITY

    A Demand Institute survey of more than 1,000 Millennial households suggests the generation will generate
    $1.66 trillion in revenue between now and 2020, using an average home sale price of $200,000, based solely on Millennials’ desire for home ownership and their arrival in the peak new starter home buying ages of 25–34 years old. If current conditions hold, it predicted the number of Millennial households would rise by 8.3 percent over the next five years, from 13.3 million to 21.6 million.

    But the Institute’s own data comparing existing home ownership  rates among Millennials based on student debt suggests that just removing the burden of student debt would increase these numbers even more. According to their findings, debt elimination would increase the number of home owners among 25–34 year old college graduates by 24 percent, 16 percent among 25–29 year olds, and eight percent for 30–34 year olds.lix Based on the cohort’s current population that would represent over five million more homeowners or $1 trillion in new home purchases. But some portion of that population would actually be forming joint households. If 60 percent marry each other, that would still mean an additional three million new home buyers, or a roughly $600 billion dollar increase in market sales over five years from just this one barrier-busting move.

    A separate analysis by John Burns Consulting argued that just the hurdle of student debt cost the U.S. housing market $83 billion dollars in sales last year. They estimate that every $250 in monthly student loan payments decreases home borrowing and purchasing power by $44,000. The number of households
    headed by those under 40 who owe at least $250 in monthly student loan payments has tripled since 2005 to 5.9 million. Multiplying those numbers times an average home sale price of $200,000 leads to their $83 billion conclusion—or $415 billion over five years.

    Others put the impact on the housing market of missing Millennials at more than twice that level by taking a look at the entire panoply of financial hurdles the generation faces, not just student debt. A Ned Davis Research report suggested these hurdles caused a drop in demand  for housing from Millennials of three million homes, for an annual market impact of $600 billion. Their estimate suggests “missing Millennials” represent more than a 1.3 trillion dollar market opportunity over the next five years. Whether the housing market will enjoy that type of revenue growth depends a great deal on how hard it focuses on the hurdles facing this critical home buying cohort.

    Although no one is going to wave a magic wand and make student debt disappear overnight, it is possible for government to take
    aggressive steps to limit if not eliminate these obligations. Furthermore, easing of credit and down payment requirements would have an immediate impact on Millennials’ decision to buy a new home. More generous parental leave policies on the part of the nation’s employers, either by their own initiative or government mandate, would help accelerate the pace. And policies designed to actually grow wages and expand the economy, such as easier access to affordablehigher education, would certainly help a generation struggling to put together the money they need for a down payment. Longer term policy initiatives designed to increase the supply of housing are certainly worth exploring, but the likelihood that they will be put in place in time to help the bulging number of Millennials moving into early adulthood is not high. Altogether, these initiatives could add at least an extra trillion dollars to the nation’s housing market and make Millennials so much more a part of that market than they are today.

    It’s time to give the country’s next great generation, Millennials, the same chance earlier generations had to become home owners. We need to help them overcome the hurdles they face in joining this coveted group of American families. Fortunately, the housing industry has it within its power to take the first steps to provide Millennials their piece of  the American Dream, helping ignite a housing boom that will spark an economic boom for the entire nation.

    This essay is part of a new report from the Center for Opportunity Urbanism called “America’s Housing Crisis.” The report contains several essays about the future of housing from various perspectives. Follow this link to download the full report (pdf).

    Morley Winograd is co-author of the newly published Millennial Momentum: How a New Generation is Remaking America and Millennial Makeover: MySpace, YouTube, and the Future of American Politics and fellow of NDN and the New Policy Institute.

  • Let’s Make Kalamazoo’s Promise America’s Promise

    In 2005, in order to boost their city’s economy, a small group of donors in the city Glenn Miller made famous created the Kalamazoo Promise. It  offered any graduate of the city’s public schools a four-year scholarship covering all tuition and mandatory fees at any of Michigan’s public colleges or universities, provided those students maintained a 2.0 grade average in college and made regular progress toward a degree.

    The offer had an immediate and noticeable effect on public school enrollments and home construction within the city as families moved back in to take advantage of the chance to boost their children’s higher education opportunity. Enrollments in the public schools rose initially by 17.6% even as high school dropout rates fell by half. Residential construction permits within the district rose from 30% within the overall metropolitan area to 50%.  The program’s success caused other cities across the country as disparate as El Dorado, Arkansas and Tulsa, Oklahoma to adopt similar programs.

    Now a recent national study of the results of such initiative has documented the positive impact such promise programs can have on increasing educational attainment, while encouraging more students to attend a wide range of colleges.  University of Pittsburgh professors, LeGower and Walsh found that programs offering scholarships to all students regardless of merit, and to the widest range of two and four year colleges and universities, saw the biggest gains in enrollment. Their research published in a National Bureau of Economic Research working paper, documented enrollment gains in Kalamazoo and other identical programs.

    With these compelling results in hand, it’s time to make Kalamazoo’s promise America’s promise. A bi-partisan proposal from the non-profit Redeeming America’s Promise seeks to do just that by creating a federal American Promise Scholarship program that would pay the cost of tuition for every academically capable and personally determined high school student in America from families earning $180,000 or less. The plan would offer two year scholarships for high school graduates of $2500 per year, and four year scholarships worth on average $8500 per year to students graduating with a 2.75 GPA. These rates represent the current average cost of in state resident tuition at our public community colleges and universities. States would need to agree to accept such scholarships in lieu of any tuition payments from the families of APS students and at a minimum maintain their current level of support for their institutions. Additional incentives would be provided to encourage them to do even more to make sure a college education is both accessible and affordable for their residents. According to the Bipartisan Policy Center, there is $52 billion in current expenditures which can be used to fund the American Promise Scholarships by redirecting the money the federal government currently spends on tuition tax credits as well as by integrating the Pell Grant program into this new form of support.

    Other parts of the plan, which can be downloaded in its entirety at redeemingamericaspromise.org, would provide additional support for students who are the first in their family to attend college and reward college completion as well as post-graduation service to community or country. Money for these programs can be found by reducing the level of profits the government currently makes on student loans and ending other college support programs which have not proven their effectiveness.  

    The current system of financing higher education is unsustainable.  Student loan debt, which is not dischargeable in bankruptcy, now exceeds one trillion dollars—more than all the credit card debt in the country. The burden is felt disproportionately by lower and middle income families and is a severe drag on the desire of members of the Millennial Generation (born 1982-2003) to start a family, buy a house and have children. Furthermore, there is no historical precedent for placing such a burden on our youngest citizens.

    Since the country’s founding, education has been a key component of the promise of upward economic mobility. This has been true in every era, beginning with the Northwest Ordinance setting aside land for one room schoolhouses to the institution of mandatory, free primary education in all states at the time of the Civil War. The expansion of educational opportunities continued in the 20th Century as our growing Industrial Age economy required workers with a high school education for our factories and offices. Government funds in every state and community were set aside to provide a free, public high school education for boys and girls to respond to these new demands. Later in the century, after WWII, the GI Bill of Rights and then the Higher Education Act 0f 1965 were enacted to further encourage college enrollment, thereby establishing the educational foundation for our rapidly expanding middle class. It is only in this century that we have asked a generation, Millennials, to self-finance the education they need, and our country needs, to be economically successful.

    This wrong-headed inter-generational and economically disastrous policy needs to end before America loses its global competitive edge for good. The current system is creating a skills gap.

    America needs to make Kalamazoo’s Promise a promise every American can count on and that can address the growing skills gap in many parts of the occupational spectrum.  By joining with the Democrats and Republicans, young and old, who are already supporting Redeeming America’s Promise’s plan to make college tuition free we can ensure that day arrives sooner rather than later.

    Morley Winograd is co-author of the newly published Millennial Momentum: How a New Generation is Remaking America and Millennial Makeover: MySpace, YouTube, and the Future of American Politics and fellow of NDN and the New Policy Institute.

    Graduation photo by Bigstock.

  • Don’t Mess With Census 2010

    The announcement last week that Congressional Black Caucus members plan to press President Obama to keep the 2010 census under White House supervision, even if the former Democratic Governor of Washington, Gary Locke, is confirmed as Commerce Secretary, brought back memories of a movie I’d seen before — a bad movie.

    The statement came from Rep. William Lacy Clay, D-Mo., the caucus’ leading voice on the census, and chairman of the House Oversight and Government Reform panel, which has jurisdiction over the decennial count. His assertion that the White House needs “to be hands-on, very much involved in selecting the new census director as well as being actively involved and interested in the full and accurate count,” suggests that the partisan gap about what the census should accomplish is no closer to being closed than it was ten years ago when we last undertook the constitutionally mandated exercise in counting everyone living in America. The gap was so big last time that it helped bring about the complete shutdown of the United States government.

    When Newt Gingrich became speaker of the House he decided, in his own paranoid way, that Bill Clinton and the Democrats would use their executive authority to produce a biased census whose over-count of minorities would shift, in his opinion, twenty-four House seats from the Republicans to the Democrats after the 2000 census. Of course, it was ludicrous to think such an outcome would occur, since legislative boundaries are drawn by the party in power in each state. Whatever numbers the census produces in our decennial exercise can be manipulated to produce any outcome each state’s ruling party desires, as Congressman Tom DeLay and his Texas Republican cronies proved a few years ago. Nevertheless, Gingrich was determined to use the Congressional appropriations process to undercut any attempt by the Democrats to overstate minority populations in the several states.

    The method by which this nefarious plot was to be carried out, in the Republican party’s opinion, was by the use of a large sample of Americans to be surveyed at the same time as the actual count, or enumeration, required by the Constitution was taking place. In response to concerns about previous census inaccuracies — both overcounts and undercounts — the National Academy of Sciences had recommended that the Census Bureau use survey sampling techniques to validate not just the overall count but the individual demographic sub-groups that the census’s enumeration process would identify. But this was a hugely expensive undertaking. To gain statistical accuracy, about 1.3 million Americans would have to respond to a lengthy survey that would cost about a half a billion dollars to execute. And it was this expenditure that Gingrich refused to appropriate. When he and Clinton came to the ultimate showdown on funding the government Gingrich blinked.

    As part of the budget settlement that reopened the government after the shutdown, Clinton forced him to reinstate funding for the sample survey. But despite having established the primacy of the White House in the conduct of the census, matters actually got worse for awhile. When I became Director of the National Partnership for Reinventing Government (NPR) under Vice President Al Gore, I was asked to monitor the implementation of the census to be sure it was done as effectively and as efficiently as possible. But the first idea on how to accomplish that came straight out of the same White House partisan playbook that is now being invoked by the Congressional Black Caucus.

    In order to assure that the process was “bi-partisan,” it was suggested that a commission be established made up of equal numbers of Republicans and Democrats who would oversee the activity on behalf of the Congress. Since the commission was to be equally divided, the Clinton White House wanted to make sure that only the most partisan Democrats — those who would never concede an inch to their Republican counterparts on issues such as funding and methodology — were selected. Names like Harold Ickes, Supervisor Gloria Molina, and Congresswoman Maxine Waters were discussed as representative of the type of Democrat who would make sure the use of sampling to confirm the accuracy of the count was preserved. Fortunately, thanks to the eloquence of Rob Shapiro, the Undersecretary for the Department of Commerce who had the actual authority to supervise the Census, cooler heads in the Vice President’s office were able to prevail over their White House counterparts, and the Commission notion was abandoned.

    But that didn’t stop the two parties from continuing their warfare over the value of a sample supplemented census vs. a straight enumeration. Republicans sued the Census Bureau in federal court, demanding that only the actual count of residents as provided in the Constitution be used for any Congressional redistricting by the states. The Federal Appeals court dismissed the Republican lawsuit as none of the Court’s business. Foreshadowing the outcome of Gore v. Bush in 2000, the Supreme Court surprisingly took up the case and overturned the Appeals court ruling. As a result, all subsequent redistricting efforts have used only the enumeration count from the 2000 census. On the other hand, formulas used to allocate federal funds based on population characteristics were unaffected by the ruling and could have used the sampling process, had it not met an untimely and unnecessary death.

    As soon as George W. Bush was elected and the incredibly professional Director of the Census Bureau, Ken Prewitt, was removed from office, the Commerce Department’s new partisan Secretary, Donald Evans, determined that the sample that had been prepared over the strong objections of Congressional Republicans was not useable. Sampling, as originally conceived, was never implemented, and the country ended up relying on a very strong effort to count households and those living in them for its 2000 census. This method tends to overcount families with two houses, who respond to the census form at both of their addresses, and college students who generally answer the form from their dorm room while their parents report them as still in their household back home. And, of course, it tends to undercount less affluent populations with fewer physical ties to a specific dwelling, particularly Native Americans, and to some degree Hispanics and African Americans.

    Despite these problems, a sampling approach could not be used to help correct inaccuracies in this year’s census, even if Rahm Emanuel himself were to oversee it. We are too far along in the process to recreate it. There is, however, a substitute available that should alleviate the concerns of all but the most stubborn partisans on both sides of the issue. Under the Gore reinvention initiative, the Census Bureau conceived of a concept now known as the American Community Survey. It was designed to survey a vast quantity of households over time to acquire the kind of detailed demographic data that was usually obtained from the subset of the population, about one in ten, who were asked to complete the “long form” of the census questionnaire every ten years. Republicans hated this form and the type of questions it asked; they saw it as an unlawful intrusion on the privacy of families by the federal government. Those of us in charge of reinventing the federal government thought the ACS could be a much more scientific and efficient way of collecting this essential data, but our challenge was to keep it from becoming a political football in the partisan warfare over the census.

    Finally, it was agreed that the Clinton administration budget proposals would include a continuing increase in funds for the ACS. In order to garner Republican support, ACS would be justified as a way to eliminate the long form by 2010. The budget request was forwarded by the head of ACS directly to the Vice President’s office, which made it a priority each year, but which never publicly acknowledged any interest in the concept. The ruse worked and the project became a reality. The long form will not be used in the upcoming census because the ACS has gathered, over time, sufficient data on the demographic details of America’s population as to make it unnecessary.

    Given the existence of the ACS, those now waging a battle over sampling vs. enumeration are truly guilty of fighting today’s war with yesterday’s weapons. In this new era, those who have a legitimate interest in as complete and accurate a census as possible should instead direct their efforts to the neighborhoods where the accuracy of the count will actually be determined. During the last count, the Census Bureau formed hundreds of thousands of partnerships with community groups interested in making sure that everyone they knew got counted. Today, these programs, as well as projects such as former Detroit Mayor Dennis Archer’s “Nosy Neighbors” campaign, are the best way to ensure an accurate outcome.

    The responsibility for America’s next census does not and should not rest with the White House. But President Obama’s experience does offer some direction: neighborhood organizing is key. Let’s hope that community leaders will follow the advice to ‘pick yourself up and dust yourself off’… and undertake the huge task of ensuring that every person is present and accounted for in America’s next census.

    Morley Winograd is co-author, with Michael D. Hais of Millennial Makeover: MySpace, YouTube, and the Future of American Politics, now available in paperback. Both of them are fellows with NDN, a progressive think tank, which is also home to his blog.