[caption id="attachment_35060" align="alignleft" width="190" caption="Courtesy of Seattle Housing Authority"][/caption]

During the past four years, the Puget Sound region has seen a nearly 50 percent drop-off in "household formation," according to Seattle-based Conway Pedersen Economics , which tracks the Northwest economy. "Household formation" is economist-speak for youngsters moving out and renting their first places on their own and for outsiders moving into the region and into homes.  The falloff in new home creation reflects a broader American housing hangover, where more overcrowding, multi-generational living, and "failure to launch"  living are becoming norms.

"We've definitely observed weaker household formation rates during the recession, because of weakening population growth," says Doug Pedersen, a principal with Conway Pedersen.

In 2006, the Puget Sound region (including King, Pierce, Kitsap, and Snohomish Counties) added 24,600 new households, Conway Pedersen says; this year, the region is expected to add only 13,600.

The fall-off tracks population growth declines, according to the firm's estimates: The region's population is expected to grow only 0.8 percent during 2010 and 2001, down from 1.4 percent during 2008. Slight recovery may start in 2011, Pedersen says.

The Seattle area's tamed population growth and curbed household formation stats aren't surprising, considering new data on the national picture. Despite adding 3.4 million new residents, America  has lost 1.2 million households in recent years, according to a study released last week (available here) from The Mortgage Bankers Association, a real estate finance trade organization with a stake in monitoring housing trends. (Normally, America actually adds about 1.2 million households per year, the study notes).

The homes didn't literally vanish, crumbling like dust in the wind. But what does go away in a recession times is the idea of upward mobility—moving out, or up.

Looking at local public housing and partially subsidized housing programs provides a lens into the likelihood of new household creation—both here, and nationally. While some people—the disabled, elderly, or others with permanent limited incomes—stay in public housing for long periods, many people who use public housing eventually exit it once their incomes rise or they establish residency or a career.

"In a robust economy, there's a (subset of) people moving through public and assisted housing," says Virginia Felton, a spokesperson for the Seattle Housing Authority.

But not right now: Among those with low incomes who use vouchers (i.e., the Section 8 program, a public subsidy for a portion of monthly rent) to pay for their housing, there's little movement among renters who would normally "graduate" from the  program. Currently, 8,000 Seattle households use vouchers. But with a sluggish economy, these renters aren't improving their circumstances fast enough to exit. SHA has closed its 1,500-person wait list for the program since no spots are opening. It doesn't expect to issue new vouchers till summer or fall.

Public housing is filling up: Felton says that vacancy rates in public housing have fallen from 3.3 percent in 2008 to 2.1 percent today. While a pending shortage of general housing is debatable, Felton says that a lack of affordable is a concern for both the general populace and, especially, for seniors.

There's already evidence that those who've lost homes or are considering moving into their own place may be doubling up with other family and friends to ride out the bad times.  This was a trend highlighted earlier this year by a survey of Coldwell Banker agents, which found that 37 percent of agents' buyers were shopping for a home with extended family—i.e. adults expecting to live with grown children or elderly parents—for homes they could co-inhabit. The return of multi-generational housing is also supported by Pew Research data.

The Mortgage Bankers research indicates that  rates of overcrowding—defined as more than one household member per room—rose between 2005 and 2008. Metro areas like Seattle-Tacoma-Bremerton, which it calls "emerging gateways" (with respect to immigrant and regular population growth), are seeing an estimated six-fold increase in overcrowding among those born here. Immigrants in such communities saw an increase in overcrowding to 15.4 percent (from 12 percent) over the same time period.

Felton notes that the rates of overcrowding suggested by the survey sound a little high—and that one person's "overcrowding" could be another person's family togetherness. She also notes that the Puget Sound area has seen a fair amount of new construction—like luxury condos—that could eventually be re-priced for lower-income tenants or outfitted for a different audience.

But in the meantime, she says, "doubling up" among extended families or lower-income populations may continue to be the norm—both at the low-income level and higher.
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