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February 2017

Housing Center analyzes immigrants and homeownership

Immigrants are an important part of a recovering housing market, according to research by the Joint Center for Housing Studies of Harvard University.

Using Census Bureau data, researchers report that foreign-born people accounted for about one-third of all net household formations over the past two decades, and nearly 30 percent of all gains in owner-occupied housing.

Commenting on the JCHS findings, Senior Research Fellow George Masnick noted homeownership rates for younger adult children of immigrants are substantially higher than rates for immigrants in the same age cohorts. "While homeownership rates for native-born residents with native-born parents under age 45 are higher than those for the children of immigrants, members of the latter group quickly make up this deficit after the age of 45."

Masnick and his colleagues analyzed data used in a first-ever Census report on the characteristics of three generations of US residents by nativity. It was the first to use a unique question in the Current Population Survey's Annual Social and Economic Supplement (CPS/ASEC) asking the birthplace of both the respondent and the respondent's parents.

The Census Bureau report notes that incomes and homeownership rise sharply between the first and second generations (native-born children of at least one immigrant parent), and third-and-higher generations. Comparing the three generations broadly on any variable that varies with age, such as income or homeownership was deemed to be impossible because of differences in age structure, Masnick stated.

JCHS analysts were able to examine homeownership rates by age in 5-year increments for three generations for each year 1994-2015. They found trends for two broad age groups, 25-44 and 45+.

For households age 25-44, "second generation homeownerships rates are well above those of their parents' generation but below those of later generations. Various factors may come in to play to explain the latter pattern, Masnick suggested. One factor is probably due to the greater concentration of immigrants and their children in locations with below-average homeownership rates such as the Los Angeles, San Francisco, New York City, Boston, and Chicago metropolitan areas. Also, he said there might be a greater ability of third-and-higher generation parents to help their children financially in buying their first home.

Among older adults (45+) the researchers found the homeownership rates among second and third-and-higher generations have been "essentially equal" for the past two decades except for a few years at the height of the Great Recession. After age 45, the second generation has consistently closed the gap with the third-and-higher group. By 2015, when each five-year cohort is 20 years older, the homeownership gap between generations vanished.

In a report discussing the Center's findings, Masnick stressed the need to recognize important age differences between the three generations could lead to erroneous conclusions about levels and trends in income and homeownership. "Because the second generation age structure is so young, comparisons that lump adults of all ages together will result in unduly low incomes and homeownership for this group," he remarked. As the Census report noted, most second generation U.S. residents surpass their parents' generation in many measures, particularly education, income and homeownership. "Once proper age controls are introduced, they equal or surpass the third-and-higher generations in these dimensions as well," he stated.