Housing crisis in the United States

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By the 2020s, the United States has faced a growing shortage of housing. The scope and effect of the housing crisis depends on the affected region or segment of the population. The housing shortage has been cited as a major factor in inflation in the US, [1] [2] [3] [4] Artificial scarcity in the supply of housing, due to NIMBYism, has been a significant factor in making housing more expensive. [5] [6] Freddie Mac estimated that the shortage of homes increased by 52%, to 3.8 million units, between 2018 and 2020. [7]

Contents

Cost burden

The United States Department of Housing and Urban Development (HUD) defines affordable housing as "housing on which the occupant is paying no more than 30 percent of gross income for housing costs, including utilities." [8] HUD uses the terms "cost burdened" and "severely cost burdened" to describe individuals or families that spend more than 30% and 50% of their income on housing costs, respectively. [9] According to the 2020 U.S. census, 46% of American renters are cost burdened, with 23% severely cost burdened. [10] The affordable housing gap especially impacts the lower-income households in America. A 2017 HUD survey found that 89% of extremely low income renter households were moderately or severely cost burdened. 83% of very low income households, 54% of low income households, 20% of moderate income households, and 6% of high income households met the same criteria. [11]

The U.S. Census Bureau found that if you took out housing costs, inflation at the end of 2023 would have been 1.8% instead of 3.2%. [7]

Market-wide housing shortages in high-demand areas

Decades of under-building in economically prosperous metros has led to regional housing shortages with national implications. In the 19th century, housing development in the United States was characterized by rapid urban growth in economically productive places. [12] Throughout the 20th century, however, a number of regulations that were designed to block in-fill and direct greenfield development took hold, such as exclusionary zoning. These regulations had the net effect of reducing housing construction and reducing the ability of regional housing stock to adjust to changing market conditions. Beginning in the last quarter of the 20th century, market-wide housing shortages have existed in a growing number of markets throughout the country, starting in prosperous coastal regions, such as Boston, New York, or the California Bay Area. [13] In the last two decades, these shortages have spread from coastal superstar cities to affect broader areas of the country, so that on average there is a deficit of housing nationwide. [14] Rental vacancy rates, for example, which are one marker of the balance of housing supply, have declined across the country. While, in a balanced market, rental vacancy rates should fall between 7 and 8 percent, only one U.S. census region, the South, achieved target levels on average in its metro areas as of 2021. [15]

These regional housing shortages have had nationwide effects. Rates of migration within the United States have fallen, housing costs have risen in areas that would otherwise provide quality jobs, and incomes from region to region have increasingly diverged. [12] Immigration into the United States in certain markets could account for a minuscule amount of inflated housing costs while some Economists believe that deporations would exacerbate the crisis given the high percentage of foreign-born workers building and fixing homes, with a professor at Wharton arguing there is no way to increase the supply without more immigration. [16] Others point out that recent immigrants demand less space, often doubling-up. [16] Immigrants are also more likely to seek out and be recruited to help revitalize places with flagging downtowns and empty homes. [16]

Within areas experiencing these shortages, effects are especially acute among the young, the poor, among renters, those living in crowded conditions, and those experiencing homelessness. Areas with market-wide housing shortages have significantly higher rates of homelessness than those with adequate or surplus housing stock: Variations in rent-levels and vacancies are chief factors explaining regional variations in homelessness rates. [17]

Median size of a new single family home built in the United States, 1973-2021, according to Census data. Zoning restrictions have contributed to this trend in a process called "McMansionization." .mw-parser-output .legend{page-break-inside:avoid;break-inside:avoid-column}.mw-parser-output .legend-color{display:inline-block;min-width:1.25em;height:1.25em;line-height:1.25;margin:1px 0;text-align:center;border:1px solid black;background-color:transparent;color:black}.mw-parser-output .legend-text{} Contractor built single-family homes Owner built single-family homes Median size of new home built.webp
Median size of a new single family home built in the United States, 1973-2021, according to Census data. Zoning restrictions have contributed to this trend in a process called "McMansionization."
   Contractor built single-family homes
   Owner built single-family homes

In certain high-demand metros, single-family zoning has also contributed to the process of "McMansionization." Rather than preserving existing single-family homes, single-family zoning can lead to replacement and upscaling because of cost pressures associated with the housing shortage. [18] A trend towards larger single-family homes is also observable in national census data. [19]

After the COVID-19 pandemic, some baby boomers whose children have moved away have found it prohibitively expensive to move into smaller homes, a paradox caused by the higher prices of newer homes, tax benefits given to long-time owners, higher interest rates, and low supply of appropriately-sized housing caused by restrictive zoning that prohibits accessory dwelling units or requires single-family homes. [20] As of 2024, this shortage is estimated to be between 4 and 7 million homes, resulting in rents rising 30% since 2017. [21]

Affordable and supportive housing

In addition to market-wide housing shortages in certain regions of the United States, the term "housing crisis" has been used to describe persistent shortages of non-commodity and supportive housing provided to vulnerable members of the population. Even in regions with relatively abundant market-rate housing, the market can fail to supply safe and sufficient housing to populations with very low income or disabilities that impair independent living. Insufficient public funding has contributed to a distinct housing crisis affecting these groups. [22] [23] Even regions with relatively abundant housing supply and low rates of homelessness, such as Mississippi, face challenges with street homelessness due to factors like addiction, as well as issues with housing quality. [24]

The affordable housing gap is a socio-economic phenomenon characterized by the scarcity of affordable housing relative to the demand for it. [25] This disparity is linked to social, racial, and economic inequality, and disproportionately affects households with lower incomes. The insufficiency of suitable affordable housing options can lead to negative outcomes for both families and communities, including homelessness.

Discrimination and evictions

In addition to shortage and affordability issues, the term "housing crisis" has been used for overlapping concepts such as a "fair housing crisis," involving residential discrimination and effects of segregation; an "eviction crisis"; issues of gentrification and displacement; and environmental concerns. Eviction, displacement, and forms of housing inequality are worsened by and related to the shortage and affordability crisis, but also have causes of their own and require distinct solutions. [26] [27] [ additional citation(s) needed ]

Rising insurance premiums due to natural disasters has been one source of climate-driven price increases, [28] with one estimate showing home insurance premiums rising 33% between 2020 and 2023. [29] Climate change can also raise energy costs as hotter summers require more energy to keep home cool. [29]

Price fixing

Rent algorithm

ProPublica in 2022 investigated the use of RealPage's algorithmic pricing scheme by many competing rental companies across the United States to set rental prices, which critics allege has helped to raise rents by limiting competition. [30] The US DOJ escalated its investigation into price fixing in March of 2024, [31] and filed an anti-trust lawsuit in August of 2024. [32]

See also

Related Research Articles

Inclusionary zoning (IZ) is municipal and county planning ordinances that require or provide incentives when a given percentage of units in a new housing development be affordable by people with low to moderate incomes. Such housing is known as inclusionary housing. The term inclusionary zoning indicates that these ordinances seek to counter exclusionary zoning practices, which exclude low-cost housing from a municipality through the zoning code. Non-profit affordable housing developers build 100% of their units as affordable, but need significant taxpayer subsidies for this model to work. Inclusionary zoning allows municipalities to have new affordable housing constructed without taxpayer subsidies. In order to encourage for-profit developers to build projects that include affordable units, cities often allow developers to build more total units than their zoning laws currently allow so that there will be enough profit generating market-rate units to offset the losses from the below market-rate units and still allow the project to be financially feasible. Inclusionary zoning can be mandatory or voluntary, though the great majority of units have been built as a result of mandatory programmes. There are variations among the set-aside requirements, affordability levels, and length of time the unit is deed-restricted as affordable housing.

<span class="mw-page-title-main">Affordability of housing in the United Kingdom</span> Housing affordability in the UK

The affordability of housing in the UK reflects the ability to rent or buy property. There are various ways to determine or estimate housing affordability. One commonly used metric is the median housing affordability ratio; this compares the median price paid for residential property to the median gross annual earnings for full-time workers. According to official government statistics, housing affordability worsened between 2020 and 2021, and since 1997 housing affordability has worsened overall, especially in London. The most affordable local authorities in 2021 were in the North West, Wales, Yorkshire and The Humber, West Midlands and North East.

A real-estate bubble or property bubble is a type of economic bubble that occurs periodically in local or global real estate markets, and it typically follows a land boom or reduce interest rates. A land boom is a rapid increase in the market price of real property such as housing until they reach unsustainable levels and then declines. This period, during the run-up to the crash, is also known as froth. The questions of whether real estate bubbles can be identified and prevented, and whether they have broader macroeconomic significance, are answered differently by schools of economic thought, as detailed below.

The YIMBY movement is a pro-housing social movement that focuses on encouraging new housing, opposing density limits, and supporting public transportation. It stands in opposition to NIMBY tendencies, which generally oppose most forms of urban development in order to maintain the status quo.

<span class="mw-page-title-main">Affordable housing</span> Housing affordable to those with a median household income

Affordable housing is housing which is deemed affordable to those with a household income at or below the median, as rated by the national government or a local government by a recognized housing affordability index. Most of the literature on affordable housing refers to mortgages and a number of forms that exist along a continuum – from emergency homeless shelters, to transitional housing, to non-market rental, to formal and informal rental, indigenous housing, and ending with affordable home ownership. Demand for affordable housing is generally associated with a decrease in housing affordability, such as rent increases, in addition to increased homelessness.

<span class="mw-page-title-main">Workforce housing</span> Housing for low-income households near workplace

Workforce housing is a term that is increasingly used by planners, government, and organizations concerned with housing policy or advocacy. It is gaining cachet with realtors, developers and lenders. Workforce housing can refer to any form of housing, including ownership of single or multi-family homes, as well as occupation of rental units. Workforce housing is generally understood to mean affordable housing for households with earned income that is insufficient to secure quality housing in reasonable proximity to the workplace.

<span class="mw-page-title-main">Housing</span> Living spaces

Housing refers to the usage and possibly construction of shelter as living spaces, individually or collectively. Housing is a basic human need and a human right, playing a critical role in shaping the quality of life for individuals, families, and communities, As such it is the main issue of housing organization and policy.

<span class="mw-page-title-main">Affordable housing in Canada</span>

Affordable housing in Canada refers to living spaces that are deemed financially accessible to households with a median household income. Housing affordability is generally measured based on a shelter-cost-to-income ratio (STIR) of 30% by the Canada Mortgage and Housing Corporation (CMHC), the national housing agency of Canada. It encompasses a continuum ranging from market-based options like affordable rental housing and affordable home ownership, to non-market alternatives such as government-subsidized housing. Canada ranks among the lowest of the most developed countries for housing affordability.

<span class="mw-page-title-main">San Francisco housing shortage</span> Housing affordability crisis

Starting in the 1990s, the city of San Francisco and the surrounding San Francisco Bay Area have faced a serious housing shortage. The Bay Area's housing shortage is part of the broader California housing shortage.

A housing crisis is either a widespread housing shortage in places where people want to live or a financial crisis in the housing market. Housing crises can contribute to homelessness and housing insecurity. They are difficult to address, because they are a complex "web of problems and dysfunctions" with many contributing factors.

<span class="mw-page-title-main">California housing shortage</span> Extended and increasing shortage since 1970

Since about 1970, California has been experiencing an extended and increasing housing shortage, such that by 2018, California ranked 49th among the states of the U.S. in terms of housing units per resident. This shortage has been estimated to be 3-4 million housing units as of 2017. As of 2018, experts said that California needs to double its current rate of housing production to keep up with expected population growth and prevent prices from further increasing, and needs to quadruple the current rate of housing production over the next seven years in order for prices and rents to decline.

<span class="mw-page-title-main">Affordable housing by country</span>

Affordable housing is housing that is deemed affordable to those with a median household income as rated by the national government or a local government by a recognized housing affordability index. A general rule is no more than 30% of gross monthly income should be spent on housing, to be considered affordable as the challenges of promoting affordable housing varies by location.

<span class="mw-page-title-main">New York City housing shortage</span>

For many decades, the New York metropolitan area has suffered from an increasing shortage of housing, as housing supply has not met housing demand. As a result, New York City has the highest rents of any city in the United States.

California Senate Bill 35 is a statute streamlining housing construction in California counties and cities that fail to build enough housing to meet state mandated housing construction requirements, and exempts construction under the law from California Environmental Quality Act review. The bill was introduced to the California State Assembly by State Senator Scott Wiener (D-SF) on December 15, 2016. SB 35 aims to address the California housing shortage by increasing housing supply. The bill was signed into law on September 29, 2017 by Governor Jerry Brown as part of California’s 2017 Housing Package – a set of 15 bills that provide “an injection of new regulatory and financial resources” for cities.

<span class="mw-page-title-main">Affordable housing in Silicon Valley</span>

Silicon Valley, a region located in the southern part of the San Francisco Bay Area, is one of the most expensive regions to live in the United States, and many residents lack access to affordable housing. In 2018, the median home price across the area was $1.18 million, the highest of the 100 largest metro areas in the U.S. The growth of the technology industry in the area, including major companies like Google, Facebook, and Apple, is frequently cited as a major cause of the issue. There have been local efforts to address affordable housing, as well as state measures in response to housing issues across California.

<span class="mw-page-title-main">Housing in the United States</span> Overview of housing in the United States

Housing in the United States comes in a variety of forms and tenures. The rate of homeownership in the United States, as measured by the fraction of units that are owner-occupied, was 64% as of 2017.

The Australian residential property market is the section of the Australian property market that provides rental properties by landlords to tenants. In Australia 31% of households rent their residences. The vast majority rent from private landlords, and a small minority rent from public housing authorities. Over the last three decades the proportion of Australians in public housing has halved, whilst the amount renting privately has grown. The average weekly price for a rental in Australia is $570 AUD. Sydney has the most expensive capital city rents. Rental rates have increased faster than inflation in recent years.

<span class="mw-page-title-main">Housing insecurity</span>

Housing insecurity is the condition of lacking stable, safe, and affordable housing. without being entirely homeless. Housing insecurity is associated with worse health outcomes and can be alleviated by increasing the housing supply, for example loosening zoning regulations.

The term "affordable housing" refers to housing that is considered economically accessible for individuals and families whose household income falls at or below the Area Median Income (AMI), as evaluated by either national or local government authorities through an officially recognized housing affordability index. However, in the US, the term is mostly used to refer to housing units that are deed restricted to households considered Low-Income, Very Low-Income, and Extremely Low-Income. These units are most often constructed by non-profit "affordable housing developers" who use a combination of private money and government subsidies. For-profit developers, when building market-rate developments, may include some "affordable" units, if required as part of a city's inclusionary zoning mandate.

<span class="mw-page-title-main">Housing in Virginia</span>

Housing in Virginia comes in a wide variety of forms, from single-family homes to apartment complexes. The rate of home ownership in the Commonwealth of Virginia was measured at 69.1% in 2023, a 2.5% increase from 2022's figure of 67.4%.

References

  1. ↑ Derby, Michael S. (September 27, 2022). "Fed's Harker says housing shortage a key inflation driver". Reuters.
  2. ↑ O'Donnell, Katy; Guida, Victoria (November 10, 2021). "Biden's next inflation threat: The rent is too damn high". Politico. Housing costs just posted one of their largest monthly gains in decades, and many economists expect them to loom large in inflation figures over the next year heading into the 2022 midterm elections. It's not just economists — the Federal Reserve Bank of New York said in research released Monday that Americans on average expect rents to rise 10.1 percent over the next year, the highest reading in the survey's history.
  3. ↑ Bahney, Bryan Mena, Anna (2024-03-08). "Biden says he can fix America's housing affordability crisis. Will it work? | CNN Business". CNN. Retrieved 2024-07-24. Fed Chair Jerome Powell in testimony this week said a growing housing shortage is likely to result in continued housing inflation.{{cite web}}: CS1 maint: multiple names: authors list (link)
  4. ↑ O'Donnell, Katy (March 18, 2022). "The main driver of inflation isn't what you think it is". Politico. But when it comes to the single biggest driver of runaway prices, Washington's hands are mostly tied. Skyrocketing housing costs may create even bigger problems for the administration going forward than oil and food price spikes, which are the result of sudden and unforeseen — but probably temporary — events. That's because there's no clear end in sight for shelter inflation.
  5. ↑ Levitz, Eric (2024-02-18). "How NIMBYs are helping to turn the public against immigrants". Vox. Retrieved 2024-07-24.
  6. ↑ Casselman, Ben (2024-06-20). "The Housing Market Is Weird and Ugly. These 5 Charts Explain Why". The New York Times. ISSN   0362-4331 . Retrieved 2024-07-24.
  7. 1 2 Boak, Josh (2024-03-15). "Why are so many voters frustrated by the US economy? It's home prices". AP News. Archived from the original on 2024-09-09. Retrieved 2024-09-28.
  8. ↑ "Glossary of Terms to Affordable Housing". U.S. Department of Housing and Urban Development. 2011. Archived from the original on Jan 5, 2024.
  9. ↑ Larrimore, Jeff; Schuetz, Jenny (2017-12-22). "Assessing the Severity of Rent Burden on Low-Income Families". FEDS Notes. 2017.0 (2111). Board of Governors of the Federal Reserve System. doi:10.17016/2380-7172.2111. Archived from the original on Jan 4, 2024.
  10. ↑ Schaeffer, Katherine (March 23, 2022). "Key facts about housing affordability in the U.S." Pew Research Center. Retrieved 2022-11-20.
  11. ↑ "Rental Housing: As More Households Rent, the Poorest Face Affordability and Housing Quality Challenges" (PDF). United States Government Accountability Office. May 2020. Archived (PDF) from the original on Apr 24, 2023.
  12. 1 2 Glaeser, Edward L. (2020). "The Closing of America's Urban Frontier". Cityscape. 22 (2): 6. ISSN   1936-007X. JSTOR   26926891.
  13. ↑ Smith, Jennifer (2023-10-30). "Kenzie Bok says Boston housing shortage no accident". CommonWealth Beacon. Retrieved 2023-12-30.
  14. ↑ Bahney, Anna (2023-03-08). "The US housing market is short 6.5 million homes". CNN Business. Retrieved 2023-12-30.
  15. ↑ "Supply Skepticism Revisited: What New Research Shows About the Impact of Supply on Affordability". furmancenter.org. Retrieved 2023-12-30.
  16. 1 2 3 Smialek, Jeanna; DePillis, Lydia; Rodriguez, Natasha (October 11, 2024). "Trump Blames Immigrant Surge for Housing Crisis. Most Economists Disagree". New York Times.
  17. ↑ Gregg Colburn; Clayton Page Aldern (2022-03-16). "Homelessness Is a Housing Problem". Sightline Institute. Retrieved 2023-12-29.
  18. ↑ Tobias Peter (September 16, 2024). "The Opportunity Cost of McMansionization in the Los Angeles Metro". Metropolitan Abundance Project.{{cite web}}: Check |url= value (help)
  19. ↑ "Characteristics of New Housing". United States Census Bureau.
  20. ↑ Laurel Wamsley (April 18, 2024). "Many baby boomers own homes that are too big. Can they be enticed to sell them?". NPR.
  21. ↑ Louise Kelly, Mary; Venkat, Mia; Fink, Kathryn; Troop, William (April 23, 2024). "Housing experts say there just aren't enough homes in the U.S." NPR.
  22. ↑ "Why Is America Still Falling Short on Affordable Housing?". Architectural Digest. 2023-12-28. Retrieved 2023-12-29.
  23. ↑ "Permanent Supportive Housing as a Solution to Homelessness: The Critical Role of Long-Term Operating Subsidies" (PDF).
  24. ↑ "Mississippi has problems, but it's handling homelessness better than L.A." Los Angeles Times. 2023-08-23. Retrieved 2023-12-30.
  25. ↑ Wallace, James E. (1995). "Financing affordable housing in the United States". Housing Policy Debate. 6 (4): 785–814. doi:10.1080/10511482.1995.9521205.
  26. ↑
  27. ↑ George Fernandez (2023-04-21). "It's National Fair Housing Month. And no one's paying attention". Pennsylvania Capital-Star (Opinion). Retrieved 2023-12-30.
  28. ↑ "Home insurance rates are rising due to climate change. What could break that cycle?". NPR. July 23, 2024.
  29. 1 2 Becker, William S. (2024-07-22). "Opinion: Climate inflation is eating your paycheck — and it's only going to get worse". The Hill. Retrieved 2024-07-24.
  30. ↑ Vogell, Heather; Coryne, Haru; Little, Ryan (2022-10-15). "Rent Going Up? One Company's Algorithm Could Be Why". ProPublica. Retrieved 2024-08-21.
  31. ↑ Sisco, Josh (March 20, 2024). "DOJ escalates price-fixing probe on housing market". Politico.
  32. ↑ Vogell, Heather (2024-08-23). "DOJ Files Antitrust Suit Against Maker of Rent-Setting Algorithm". ProPublica. Retrieved 2024-08-24.
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