
New projections from the Harvard University’s Joint Center for Housing Studies (JCHS) indicate household growth in the coming years will be significantly slower than the recent past. Among the knock-on impacts of lower household growth will be a notable impact on housing demand.
The JCHS forecasts an increase in households of 8.6 million between 2025 and 2035, or 860,000 per year. In comparison, 10.1 million households were added during a “sluggish” period of growth in the wake of the Great Recession in the 2010s.
The JCHS projects growth will slow even further between 2035 to 2045 with only 5.1 million new households. Such growth would be the lowest in any decade during the last 100 years. Levels could be even lower than projected depending on immigration levels, according to the JCHS. The current projections assume immigration levels similar to those of the past three decades.
With household growth as the single biggest source of demand for new housing, a slowdown in household formation over the next two decades will have a significant impact on the new construction market. The projected slowdown will reduce demand for new unit construction from the current rate of 1.4 million units per year to an average of 1.1 million units per year between 2025 and 2035 and to 800,000 units per year in 2035 and 2045, according to JCHS.
In a scenario with lower immigration, the JCHS projects demand would support the construction of just 950,000 new units per year between 2025 and 2035 and just 610,000 units per year between 2035 and 2045.
However, the JCHS caveats actual construction levels may indeed be higher in the future as the industry works to overcome the existing housing shortage, estimated to be anywhere between 1.5 million to 5.5 million units.
In addition to documenting the likely slowdown in household growth, the JCHS report identifies expected changes in household demographics in the coming decade. Of the most significant demographic trends will be the growth in the number of older adult households. The number of households headed by a person aged 80 or older will rise nearly 60% in the next ten years according to the JCHS. As a result, demand for aging-in-place and similar remodeling projects will increase.
JCHS projects the number of households headed by people in Gen Z and younger (under the age of 30 in 2025) will increase to 38 million in 2035 from 15 million in 2025 while the number of households headed by baby boomers will decline to 36 million in 2035 from 52 million in 2025. The JCHS suggests the higher number of households lost each year from aging or mortality will contribute to driving down net household growth.