Prospective renters arrive for the grand opening of Gibson Santa Monica, a new luxury apartment building in downtown Santa Monica, Calif. (AP Photo/Richard Vogel)

The majority of American households still own their homes, a fact that will remain true as far into the future as demographers and economists can see. But the balance of homeowners and renters has been shifting in the U.S. in ways that have already altered the demographics of renting, the affordability of rental housing and the kind of new housing we build.

This shift, underway since the housing bust, is flipping conventional images of what it means to rent: Renters are now living, by the millions, in single-family homes that were once owned. Wealthy households far from the stereotype of struggling twenty-somethings are renting, too. So are the parents of those twenty-somethings.

It's too soon to say, though, whether this new picture — an American housing market tilting, steadily, toward more renters — represents a sane correction from the housing bubble, or an overcorrection that will only bring new problems. We don't know exactly how many of these renters would prefer to own if only they could. In a country where household wealth (and financial stability in retirement) is often bound up in housing, what will happen to the growing number of people who never become homeowners?

"What is the natural, normal rate of homeownership? No one knows the answer to that question," says Chris Herbert, the managing director of Harvard's Joint Center for Housing Studies, which released its annual "State of the Nation's Housing" report today. "At some level, what it comes down to is how many people would like to own — who actually objectively have the ability to own in the sense of being able sustain it — and can’t? We don’t know."

The U.S. homeownership rate, over 69 percent at the height of the housing bubble, had fallen by the beginning of 2015 all the way to 63.7 percent. That means over the last 10 years that the U.S. has lost all of the homeownership gains of the previous 20 years. It means, according to the report, that the 2010s are on pace to be the strongest decade for renter growth in history.


Harvard Joint Center for Housing Studies annual "State of the Nation's Housing" report

That steep drop has put the national homeownership rate back where it last was in 1993. Effectively, 1.7 million fewer households owned their homes by 2015 than did at the bubble's peak.

"If you look at the long sweep of the last several decades, a five percentage-point move in the homeownership rate is substantial," Herbert says.

The large baby boom generation — now in the over-50 years when homeownership rates are typically high — has helped prop up the national homeownership rate, masking what has been a precipitous decline for younger groups. The homeownership rate for 35-to-44-year-olds hasn't been this low since the 1960s.


Harvard JCHS

The growth in renters has come from singles and families, twenty-somethings and retirees, moderate-income households and wealthier ones, too. In fact, households headed by someone over 55 are responsible for 42 percent of the growth in renters over the last decade. Nearly one in three new renters since 2011 comes from the wealthiest fifth fourth of all U.S. households.

"We think, 'oh it’s millennials driving it,'" Herbert says. "And it’s not. It's across a broader spectrum of ages and income."


Harvard JCHS

All of this rental demand — which may alter along the way how we think about who rents — is straining the country's rental housing supply. If rental costs feel like they're rising fast, blame (in part) the declining homeownership rate. Rental vacancies are as scarce as they've been in nearly 20 years, according to the Harvard report. Last year, rental prices rose twice as fast as inflation.

The rental supply simply hasn't kept pace with these broad changes in how many Americans want (or need) to rent. A lot of this demand, Herbert says, was initially met by single-family homes that were converted to rentals. More than half of the growth in renters from 2004 to 2013 came from households living in the kind of detached single-family homes Americans have long associated with homeownership.

The building industry has increasingly responded with new multi-family buildings, the vast majority of which are now intended for renters.


Harvard JCHS

But that new construction hasn't been enough to keep pace with the rapid changes in rental demand. And most of these apartments have been built — as Washington illustrates — for the high end of the market.

"As we keep going, there's got to be a limit to that," Herbert says. "How many luxury rentals can you build?"

For reasons of demographics and debt, the homeownership rate is likely to continue falling for years to come, further pushing these trends, and giving us — and the homebuilding industry — a lot of time to think about what a more heavily rental America really means.