Since the outset of the COVID-19 pandemic, aging in place has gone from a gradually growing trend to a virtual mandate for Baby Boomers.

In earlier generations, it was common for seniors to move in with family or to assisted living communities in the years that followed retirement. This movement continually refreshed the inventory of homes for sale, aiding in the transfer of wealth from older to younger generations.

Without this release of inventory, Baby Boomers are maintaining their wealth at the expense of their children’s access to homeownership — the most assured and common way to build wealth.

As of Q1 2021, homeownership is spread unevenly across the generations, with:

  • 44% of homes owned by Baby Boomers;
  • 31% owned by Generation (Gen) X;
  • 14% owned by the Silent Generation; and
  • 11% owned by Gen Y, according to a New York Times analysis.

Gen X — the generation immediately behind Baby Boomers — has been slow to catch up to Baby Boomers’ homeownership successes. The average member of Gen X is in their late-40s in 2021. When Baby Boomers were at the same stage in their lives and careers, it was the early days of the Millennium Boom, and Baby Boomer homeownership hovered around 46%, a whopping 15 percentage points higher than Gen X’s homeownership share today.

Flash forward a couple decades, and Baby Boomers still hold basically the same share of homeownership, with no signs of letting go. The implications for the generations that come behind are dire.

But do Baby Boomers have to move out?

At first glance, Baby Boomers are ruining things for everyone. But they’re not being malicious by choosing to remain in their homes longer. In fact, to say that the low homeownership rates of younger generations is the Baby Boomers’ fault is to skip over a key fact: no matter how you slice it, there simply isn’t enough housing to go around.

Here in California, roughly four-out-of-five Baby Boomers are homeowners and will continue to remain so in retirement.

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Therefore, the only way to ensure sufficient inventory for first-time homebuyers is to build more housing.

In California, new housing starts have performed below their historical average nearly every year since 1990. Further, based on current construction trends, new inventory won’t catch up for years to come.

For reference, the last time construction was above the historical average was for three brief years at the apex of the Millennium Boom. At this time, single family residential (SFR) construction topped 150,000 new homes annually. In 2020, just 59,000 new SFRs were started, in keeping with the low numbers of the past decade.

As we look ahead to the future of California’s housing market, the focus of new inventory will shift to multi-family units. State-legislative efforts have recently made it easier for builders to permit and construct multi-family units suitable for low- and moderate-income households. These denser units are becoming more and more of a necessity following years of restrictive zoning regulations that have constrained the inventory of homes for sale.

When these legislative shifts are successful, Baby Boomers will continue to hold onto their properties without any adverse effects on the younger generations of homebuyers. On the other hand, without these changes, homeownership will suffer, and turnover — the lifeblood of the real estate industry — will remain stagnant for years to come.

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