Should I Rent or Own a Home in Tucson, Arizona MSA? Housing Demographics

Have you ever wondered how many homes in your neighborhood were rentals? Or if some cities had a higher percentage of investment properties than others? These are important questions as the country faces a potential eviction crisis due to the COVID-19 pandemic. A recent MAP article: “Tracking the Pandemic Eviction Crisis” looked at how temporary measures have helped keep renters from being evicted, but many national reports are predicting a looming crisis. In particular, the National Low Income Housing Coalition estimates that 30-40 million people in the U.S. could be at risk for eviction in the near future.

For many, homeownership is part of the American Dream. A recent consumer survey from the National Association of Realtors (NAR) reported that approximately 75% of non-homeowners believed homeownership is part of their American Dream, while 90% of current homeowners felt the same. In the same survey, 43% of non-owners indicated they were not in a financial position to purchase, 33% do not own because their current life circumstances were not suitable for ownership, and 16% wanted the flexibility of renting.

Research has shown that homeownership provides social as well as financial benefits. The article “Homeowning, Social Outcomes, Tenure Choice, and U.S. Housing Policy”, published by the US Department of Housing and Urban Development, found that homeownership produces desirable social outcomes such as better neighborhoods, more civic participation, and more socially healthy children. Additionally, homeownership has traditionally provided for wealth accumulation for owners. However, historically there have been periods, like the sub-prime housing crisis, when little to no gains in wealth accumulation may occur, and renting may be advantageous.

In 2018, there were 400,907 occupied housing units in the Tucson Metropolitan Statistical Area (MSA) of which 250,126 were owner-occupied and 150,781 were renter-occupied.  For Phoenix, there were 1,658,053 occupied units with 1,035,227 owner-occupied and 622,826 renter-occupied. Tucson and Phoenix fell in the middle of peer western metros in regards to the percentage of homes that were renter-occupied at 37.6%. Salt Lake City had the lowest percentage of renter-occupied homes at 32.6%, while nearly half of homes in San Diego and Las Vegas were renter-occupied. Tucson’s percentage of renter-occupied homes was slightly higher than the state and national averages of 36.4% and 36.2%. Note that the Tucson MSA represents the same geographic region as Pima County.

Figure 1: Percent of Homes that are Renter Occupied (2018)

Homeownership and rental occupancy rates varied significantly across Pima County. Census tract data shows that the tract with the highest rental occupancy rate was near the Davis Monthan Air Force Base at over 90%. The census tracts with the lowest rental occupancy rates were on the outskirts of the more populated urban area. Figure 3 maps the rental occupancy rates by census tract, scroll over the map to view the percentage for each tract. You can zoom out to view the census tract data for the entire state.

Figure 2: Housing Tenure by Census Tract in Pima County (2018)

Tucson follows a similar pattern as the U.S. in the percentage of homes that are renter-occupied by race and ethnicity. In 2018, 36.3% of blacks lived in owner-occupied homes, while 63.7% lived in a renter-occupied home (Figure 3). Those who identified as American Indian and Alaska Native had the second-highest percentage of those living in renter-occupied homes in Tucson at 56.2%. White, non-Hispanic or Latinos had the lowest percentage of renter-occupied homes at 31.4% in Tucson and 28.2% for the nation.

Figure 3: Percent of Renter Occupied Homes by Race & Ethnicity (2018)

As one would expect, the share of renter-occupied homes for those in the younger age groups is significantly higher than those in the older age groups. In Tucson, during 2018 nearly 90% of those under the age of 25 were renters. That percentage declines as age increases, but it doesn’t fall to under 20% until you reach the 65-74 and 75-84 age groups (Figure 5). The renter share begins to increase again with the 85+ age group. The increase for the 85+ age group occurs as those individuals move in with family members or into living assisted group quarters. A recent article “While Seniors Age in Place, Millennials Wait Longer and May Pay More for their First Home” found that seniors born after 1931 are staying in their homes longer, and aging in place. This has resulted in higher homeownership rates for this age group relative to previous cohorts. The article suggests that this will increase the relative price of owning versus renting, which may make renting more attractive to younger generations.

Figure 4: Percent of Renter Occupied Homes by Age (2018)

To date, the Tucson housing market has remained stable during the coronavirus pandemic. As the moratorium on evictions ends, the rental market may begin to feel the economic consequences of the pandemic. Renters who have lost their jobs or been furloughed will be legally obligated to pay back missed payments. The moratorium on evictions has consequences that extend beyond renters. In a recent MAP article “Tracking the Pandemic Eviction Crisis: Temporary measures delay the pain for renters but not landlords" was found that 40% of residential property units are owned by individual investor landlords. Many of these landlords rely on rent to pay mortgages and taxes on those properties. There is the potential for some of these individual investor landlords to default on their rental properties. The recent article “The COVID Related Housing Crisis Nobody Mentions” suggests that many of the at-risk properties for default are multi-family units owned by small mom-and-pop property companies, many of them which are owned by black and Latinx landlords.

Stay tuned to the MAP Dashboard as we continue to update Southern Arizona on housing and the impact the COVID-19 pandemic is having on the region.