tendency for renters to become owners and owners to become renters are quite different according to the age of the household head. So, also are the rates at which people move. (Renters who move but remain renters, and owners who move but remain owners, are excluded from the components of household change since they are self-cancelling.) In each age group, we start the period with a given number of owners and renters to which specific rates for the components of change are applied. Thus, a group starting with 50% homeownership in 1960 stands a chance of reaching a higher level of homeownership by 1970 than it would had it started with a base of only 40% ownership, and so on. In other words, the process is basically cumulative. (Computations are obviously complex, same additional detail is shown in the appendix.)

REPLACEMENT DEMAND HEAVIEST FOR RENTALS... Housing units which are demolished or removed from the housing inventory by other means tend largely to be taken from the rental side of the market. This seems to have held true in the past periods which can be examined and there is little reason to assume it should not remain roughly true of the future. Many of the units removed from the housing inventory are in downtown areas where urban renewal and private renewal tend mostly to take place. The core of the cities tends to expand as the city as a whole expands and the older residential units on the fringe of downtown business districts tend largely to be rental units. Likewise, single family units, as they become older, are often first put on the rental market before they are eventually removed or replaced. Examination of past data suggests that approximately two out of three of the units requiring replacement in the 60's will be rental units--that is, will have been renter-occupied or on the rental market in 1960. However, many of these will have been 1-family houses and therefore classed as "owner-type" or sales-type" rather than "rentaltype" units.

Because 1-family

TYPE OF STRUCTURE MIX WON'T MATCH OWNER-RENTER MIX homes will be shifted to the rental market, and others will be torn down or otherwise removed from the inventory--there will be a need for over 9 million 1-family homes even though the net increase in owner households will only be about 5 million. The intricate pattern of changes within the housing inventory should normally result in demand for a higher share of "sales-type" or 1-family housing units than would be suggested by the net increases in owner versus renter households, though the experience of the 50's was apparently an exception. The estimated requirements for new construction of rental-type housing (multiple unit structures) will run over 6 million units during the 60's. About two-thirds of rental-type units can be expected to be in apartments with the remainder in 2 to 4 family structures. In addition, there will be a demand for mobile homes and trailers of about three-quarters to 1 million units.

All this still suggests nearly 40% of new construction for the decade may be in rental-type units. The 4 million apartment units will include both highrise elevator units and walk-ups--but the proportion of each cannot be estimated since there is no data, even on current construction, on which to base a projection.

*Note:

Comparable data for owner, renter, vacant occupancy is available in the
appendix. It is omitted here to avoid confusion.

1/ "Rental-Type" is total of last two columns.

PROJECTIONS SERVE POLICY FORMULATION ... NOT MARKET ANALYSIS ... There is in a complex projection problem such as this one, a wide range of possible variation. The pitfalls are such that it would not be undertaken seriously as an answer to the precise demands of market analysis though it may provide some guidance here. Its primary purpose is to aid in guiding major long-range policy decisions and for that purpose it should serve well. Some of the policy issues involved are discussed in Part IV of this report.

SOME NOTES OF CAUTION

These projections combine several variables, each of which would be subject to variations from past experience. Unfortunately, there are many gaps in the data on what has taken place in the past. We have attempted to exercise careful judgment in all of the assumptions that have been made but variation from these projections will not come unexpected.

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...

SIGNIFICANCE NOT EASILY SUMMARIZED There is no easy phrase that would wrap up in a nutshell just what the rental housing boom of the 60's means to everyone. The fact that the boom is already occurring and that it will likely continue at a high rate through most of the 60's seems, after careful analysis to be unchallengeable. There will no doubt be fluctuations in the rate at which the boom progresses. And some will no doubt prematurely signal that the boom has run its course. On the demand side, the evidence seems fairly conclusive and the uncertainties about the future would seem to apply mostly to the supply side.

On the one hand, will all of the forces which have combined favorably to assure a ready supply of rental housing, continue to be sustained through the decade? And on the other hand, are the supply factors likely to exert such increasing force as to cause substantial overbuilding of the market--a sobering consequence which could be damaging for both the industry and the economy?

The significance of the boom is obviously major for builders, investors, realtors, materials producers and distributors. But the significance does not end there. There will be an impact of varying degrees on the markets for nearly every product and service sold to consumers. While the horizontal expansion of urban areas which has characterized the postwar period until now will by no means halt, it will certainly slow. This suggests some changes, for instance, in the pattern of development of new shopping centers, location of food stores, public transportation systems, highways, etc. A reduction in the size of new housing units is part of an apartment boom and this would, for instance, reduce the market for home furnishings, landscaping, home workshops, boats, and other items of which are accommodated by the ample space provisions of suburban housing. GREATEST SIGNIFICANCE IS IN THE ECONOMIC ISSUES WHICH ARE RAISED... The principal issue in sum and substance is not so much what is happening, and why, or even what can be projected for the future--but whether or not excessive overbuilding--if and when it occurs--might inflict severe damage on the industry and the economy.

There is a kind of political and social solidity built into home ownership as well as economic stability--none of which seems to accrue in the same proportions to the renter. These are quite apart from the questions of the type of structure or housing density and while tenure issues are controversial--there should be no argument that the consumer should be afforded a much broader range of choices than he now has.

He should, for instance, be offered ample opportunity for ownership of apartment units over a full range of locational choices. He should also have the opportunity of choosing small compact 1-family homes on small sites and in a variety of locations. Few such units are being built today--and survey results attribute the major cause of this to the failure of local governments to provide for or permit them. One result of this is the growing market for mobile homes.

Consumer choices should also be broadened through greater access to suitable financing and a more liquid real estate market. While there are clear advantages. to home ownership--on a same unit basis--from the standpoint of housing costs, many who could afford the monthly payment cost of owning are forced to rent either

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at higher cost or at sacrifice of space. Also, those whose occupational characteristics require a high rate of mobility are at a similar disadvantage-because of the risk of short-term home ownership and the high cost and uncertainty of remarketing a housing unit when it is no longer needed. Typical costs of 10% to 20% attached to the resale of an existing home--when real estate commissions, closing and settlement costs, accrued interest and taxes during vacancies, mortgage prepayment penalties, etc. are all added up. A less costly, more efficient, secondary marketing system appears to be sorely needed--if real estate liquidity is to be maintained at a level favorable to home ownership. This liquidity has been provided during the past two decades by a steady upward climb of prices. But continued inflation is neither a certain or desirable way to maintain a liquid market.

RENTER CHOICES ALSO NEED TO BE BROADENED Consumer choice should likewise not be slighted in the rental housing markets. While the limited measures of consumer preference have consistently shown a high majority desire for ownership--they likewise have indicated that among home owners, there is a significant minority who would have preferred to rent.

The gradual decentralization of urban employment centers has no doubt made the 1-family dwelling the only available housing choice in many instances. A limited number of these are, of course, on the rental market. But the rental prospect's choice is obviously limited in these areas--both quantitatively and qualitatively.

Householders may well prefer to pay the premium of renting--in order to be free of the responsibilities and risks of ownership. And a free market should permit and provide for that choice.

There are ample indications that many who could easily qualify for home ownership exercise their preference for renting.

But on both sides of the buy versus rent issue--the main unanswered question is to what extent the exercise of preference may have been for location, type of structure, or community facilities, rather than for tenure.

Most available evidence suggests consumer preferences favor ownership in high proportion over rental. This fact is acknowledged by Louis Winnick in his ACTION series book Rental Housing --Opportunities for Private Investment--even though a principal conclusion of the book was (in 1958) that the rental housing market was being underbuilt. He cites several surveys which typically show preference for ownership by well over two out of three household heads.