A Headwind for Housing

03.08.18
Written by Richard Hokenson 

It has long been known that some millennials are living at home with their parents, an arrangement principally driven by economic considerations. This has led to an increase in the number of American adults who are sharing a home with other adults with whom they are not romantically involved. While we continue to view the increase in millennials as a delay in their forming a household, a recent Pew Research Center report has identified a longer-lasting depressant on household formations: parents moving in with their adult children. In 2017, 14% of the extra adults in a household were parents, double of what was in 1995 (see Chart 1).

Although economic factors, e.g. home prices, inadequate retirement savings and long-term care costs, may be reasons driving the increase in parents living with their adult children, the Pew researchers contend that it mainly reflects changing demographics – it is much more prevalent among non-white adults who are a growing share of the adult population. Although some will argue that this is a cultural preference, it also depends heavily on the age of migration. Younger immigrants have more opportunities to learn English and work long enough to be eligible for Social Security when they reach retirement age. Those who migrate at older ages face substantial barriers to assimilation because of the combination of poor English proficiency and declining health. Moreover, they are often not eligible for Social Security because they don’t have the necessary 10 years of eligible employment history.

The age of migration is the strongest predictor of living arrangements of older immigrants in the U.S. As shown in Chart 2, older U.S.-born of Mexican descent and older Mexican immigrants who arrived at younger ages are considerably less likely to coreside and more likely to live independently compared to older immigrants who arrived as adults. This pattern is also evident for migrants from other countries. Thus, it is consistent with immigrant assimilation that predicts gradual convergence of the living arrangements of immigrants toward those of the U.S.-born Americans.

It is important to stress that this increase in shared living is a consequence of official U.S. immigration policy. Older adults who migrate to the U.S. usually do so through the family reunification provision. By signing an “affidavit of support”, a naturalized U.S. citizen adult can sponsor the immigration of a parent. The parent is ineligible for public assistance during their first five years following entry which increases the parent’s dependence on support from the family. It assures the selection of older newcomers who have at least one adult child with whom they can live. Thus, high coresidence among later-life migrants is driven by the kin availability built into immigration policy.

The headwind for housing is not insubstantial. The average number of adults per household has not declined since 1995. Although it is common knowledge that the delay by millennials has depressed their rate of household formation, decreased household formation is not confined to the young. In 2017, there were 61 households headed by a 65-74 year old for every 100 persons aged 65-74 years old. The last time household formation rates for this group were this low was 1972.

Conclusion
Because the U.S. was accused of brain drain, official U.S. immigration policy became family reunification in 1965. We have long argued that this reduces the economic impact of legal immigration because of the much higher propensity for shared living or multigenerational households. Nor is there as big a positive for the labor force. A shift the immigration criteria from family to skill is long overdue.

References
Fry, Richard. (2018). “More adults now share their living space driven in part by parents living with their adult children”, Pew Research Center.

Gubernskaya, Zoya and Zequn Tang. (2017). ”Just Like in their Home Country? Multinational Perspective on Living Arrangements of Older Immigrants in the U.S.” Demography 54(5):1973-1988.

Gubernskaya, Zoya and Zequn Tang. (2018). “Older immigrant’s living arrangements in the U.S. and sending countries”, January 22, 2018.

 

 

This update was researched and written by Richard Hokenson, as of March 8 2018