Minneapolis Fed Proposes New Homeownership Metric

The Federal Reserve Bank of Minneapolis released a paper earlier this month proposing a new metric for measuring homeownership in the United States. This new methodology shifts the focus from the share of homes that are owner-occupied to the proportion of the adult population that personally owns a home, a ratio they term the "homeowners-to-population" (HPOP) ratio. While the traditional measure indicates that 65% of U.S. homes are owner-occupied, the proposed HPOP metric reveals that only 53% of American adults own their residences. The Minneapolis Fed's research highlights that the conventional owner-occupancy rate includes individuals living in a home owned by a family member but not directly by them, such as adult children or parents residing in a property owned by their offspring. The new HPOP metric specifically excludes these individuals, aiming to provide a more precise understanding of personal homeownership. This exclusion accounts for approximately 13.9% of adults who live in owner-occupied dwellings but do not hold direct ownership of the property themselves. Rental units and their occupants are excluded from both methodologies. Researchers at the Minneapolis Fed stated that their new approach "puts people first" and offers a more detailed perspective on homeownership. They argue that measuring homeownership on a per-person basis, rather than per-home, is crucial for accurately comparing homeowner characteristics across different age groups, geographical locations, and over time. This person-centric approach also better accommodates contemporary living arrangements, such as the increasing trend of multi-generational households, where adult children return to live with parents or older parents move in with their children, as well as instances of friends cohabiting in an owned property. The paper notes that the HPOP metric reveals significant variations in homeownership rates across different states. For example, Hawaii has a high owner-occupancy rate of 61% for its homes, but its HPOP rate is considerably lower at 42.7%. This disparity underscores the impact of the new methodology in differentiating between household composition and individual property ownership. The researchers believe this refined metric will lead to a more accurate assessment of the economic well-being of Americans by reflecting the reality of who directly benefits from homeownership.