Skip to content

How are we doing with our housing crisis?

Adam Ozimek and John Lettieri talk about housing:

How the next president can solve America’s housing crisis

U.S. housing costs are out of control.... Renters have not fared better.... The main reason housing is too expensive is that we don’t build nearly enough of it. The most recent estimates from Freddie Mac place the national shortfall at a staggering 3.8 million housing units.

....How did we get here? After all, buyers want to buy and builders want to build. The answer is found in a labyrinth of local zoning rules, building codes, and land use regulations that shape the map of what gets built and where. Thanks to the proliferation of local red tape, it is now impossible for the market to deliver the housing supply Americans need at prices that are broadly affordable.

The first thing we should do is call this by its proper name: California's housing crisis. That estimate of a 3.8 million unit shortage is virtually all in California. The rest of the country is OK.

But I want to push back on more than that. Let's start with the popular notion that red tape and zoning are making it impossible to build housing. Here are raw housing starts over the past few decades:

A housing start happens when a builder has acquired all the necessary permits, approvals, and zoning variances needed to break ground. It's currently right at its 40-year average.

This is strictly a measure of red tape: is it possible to build the volume of housing we need? The answer is obviously yes. And we built more in 2005, when zoning regulations were little different than they are now.

But are we building as much housing as we need? That requires a different look at things. The question is: how much net housing are we building each year compared to the net number of new buyers?

Net housing is just new units minus demolished units. Net buyers is a little more complicated, but a reasonable estimate is the number of people who turn 25 each year minus the number of people who die. Here's the ratio of those two things:

On average, we've been building more housing per buyer recently than we did in the '80s and '90s. And the level right now is historically high.

(The 2020-22 spike is due to COVID killing lots of people.)

But if we're building at a normal pace, why have prices skyrocketed? This gets a little fuzzy. The price of single-family homes is up, but that's largely because of the 2022 boom. Who knows why weird booms and busts happen? But if you look at the bigger picture it's not clear if housing really has gotten much more expensive lately:

Compared to wage growth, CPI rent is pretty much unchanged. And the two big private research firms disagree violently about how much rent has gone up after 2021. Average them together and they pretty closely match wage growth.

There are other things you can look at to judge the housing market. For example, a low rental vacancy rate means that housing is tight:

The vacancy rate is a little low right now, but not at crisis level. Take out California's super-low 4.4% rate and things would probably look pretty normal.

Bottom line: Outside of California, the evidence doesn't support the idea of either a red tape crisis or a more general housing crisis. The post-COVID scene did have some weirdness to it that we might not have fully worked through yet, but you shouldn't get panicky over a couple of years of pandemic weirdness. Nor should you overreact to media accounts of housing in California or the very hottest cities. For 90% of you, the housing market is, at most, a little warmish, nothing more.

50 thoughts on “How are we doing with our housing crisis?

  1. ritterjcat

    I think a a lot of the housing crisis narrative is focused on the urban cores of large cities (and not just New York, LA, and SF). I could certainly buy a large, very nice, affordable house in my city, but it would come with a 45 min to 1 hr commute.

    I'd be very interested in seeing charts of inflation-adjusted prices for median homes nationally vs. homes located in core urban areas of large cities (i.e., not suburbs).

    1. jayrwasdf

      I agree that it's special cores, and seems to be focused on areas with high tech growth. For sure I'd claim where I am (the Boston area) is due to that: and you can't claim it doesn't have a huge housing crisis.

    2. cmayo

      It's a crisis there, yes, but it's just the beginning. There's a burgeoning crisis everywhere. It's beginning to get its teeth into mid-sized cities now, too. The only exceptions are those that have either dropped or never had such restrictive zoning in the first place - but that comes with its own set of problems (sprawl and its consequences, to some degree, because it's always cheaper to buy green land than do infill).

    3. emjayay

      45 minutes to one hour is the average subway and/or bus commute in NYC (again, all the boroughs not just the Manhattan that "NYC" makes most people think of.) Including for me.

  2. emjayay

    I think a lot of it is because of how our cities were built, particularly postwar. A small city works fine without fast transit, so a car-dependent sprawly relatively low density mainly suburban city is fine (if you don't mind getting in the car for everything instead of walking there and everything associated with that).

    But if it keeps growing and is still city center focused for jobs the commutes get longer and the existing roads and highways/freeways are inadequate, commutes to the newly constructed areas become untenable and there's nothing that can be done to fix it other than leveling the whole place and starting over. The existing infrastructure is wrong for the population and size. Los Angles was OK until they ran out of orange groves and people kept coming. Increasing demand and not increasing much supply.

    Small towns and cities used to exist because farming was family based and used way more workers. And it could be that as a far higher % of people were college educated and beyond more cared about access to museums and theaters etc.

    Even densly built basically all prewar NYC (all five boroughs) was built out by the 1950s and had been all gridded long before. Most postwar construction was scattered infill. And adding subway transit almost entirely stopped after WWII.

    London's development by the 1930s was mainly suburban (but a two or three times denser version than in the US) with the Tube generally coming first but continued population growth has ended it up in the same place. It also has a green spaces % multiples higher than NYC and a green belt, nice if not essential but adding to the problem.

    Maybe actual City Planning majors could chime in. That was just amateur hour.

    1. emjayay

      My "nice if not essential" wording about green spaces (natural spaces or parks and squares) can be read two ways. I meant that it is something people need, particularly with more dense housing areas. NYC has two biggish parks, Central and Prospect in Brooklyn (both full of people everywhere on a nice day), and little else particularly in Brooklyn. I'm not as familiar with the rest, and of course Staten Island is Staten Island (where Trump won twice vs the Democratic landslides in the other four boruoughs.)

      Another factor in prices is bigger houses, if often on smaller lots. An average new house today has something like twice the square feet of one built in the 1950s. And much increased income inequality plays a part too. Upper classes can afford their McMansions and the rest can't afford anything.

  3. erick

    I think that a lot of stuff gets lumped into the term regulations.

    What probably has a bigger effect isn’t necessarily the stuff your talking about that hasn’t really changed, rather it’s zoning, besides outright banning anything but single family homes there is stuff like lot sizes, set backs, parking requirements, etc.

    1. SnowballsChanceinHell

      Here's an example: developer purchases an old single-family house built in the 1800s. The floorplan is "L" shaped. The developer wants to fill in the "L" so that the floorplan is rectangular (thereby gaining floorspace), add a roofdeck, and make it a three-family.

      But the city has set the acceptable floor-area-ratio and setback requirements so low that these plans will be denied and must be appealed. This is not because these plans are outrageous -- no existing buildings in this city would satisfy these requirements. So in order to build, the developer is going to need multiple variances. And the process is going to work like this: the developer must create initial plans, do a round of neighborhood outreach, revise the plans, do another round of neighborhood outreach, get the application for variances denied, and then appeal this denial to the Board of Zoning Appeals.

      In the above example, the developer managed to piss off some abutters and so the Mayor's office would not support the appeal. Because the Mayor's office would not support the appeal, the developer decided not to risk appealing. Without the additional floorspace, the project didn't pencil out and the developer sold the property. The property has been sitting undeveloped for 4+ years now. It took over a year to get to the point of the developer giving up.

      There is another property nearby where the developer couldn't get a variance and instead rebuilt luxury units within the shell of the existing structures on the lot (because they can do that of-right). The process took them 5 years.

      1. emjayay

        I understand that kind of problem is everywhere and in many other forms. At one point Donald had the idea of creating six or seven whole new cities, copying China I guess. Cities all exist for a reason - some kind of income base. You can't create that out of nothing, at least not in a free enterprise context. And mostly blames everything else on excessive regulation - which as you described is local and has nothing to do with the federal government. And with him and Republican/MAGA in charge the federal government imposing anything on states much less localities is obviously not going to happen ever.

        1. SnowballsChanceinHell

          Why does an example of how local regulations can lead to increased housing prices prompt you to refer to some dumb thing Trump once said?

          1. emjayay

            I hear he's running for President again and may well win.

            His more recent and repeated Big Idea is to give Federal land for housing. Almost all federal land is in the middle of nowhere, and of course there's nothing else to that other than a minimal concept. If there is a piece of federal land next to a city, what then? For example, if it is given or sold for cheap and then privately owned (the Republican way) then it would immediately be worth as much as any other lots and reselling the housing would be the same unaffordable price.

            1. SnowballsChanceinHell

              Okay ... so Trump's characteristically batshit idea won't solve the problem. So what?

              The question was: why are housing prices (particular in certain areas of the country) so high. Here is an admittedly anecdotal example of why housing prices are high.

              Blurting out "Orange Man Dumb" is not a meaningful response to that answer.

  4. Doctor Jay

    I dunno that last graph showing rental vacancy rate is pretty dramatic. Whether one uses the word "crisis" or not is highly subjective, I would think.

    But the difference between 10 percent vacancy (20 years ago) and 4 percent (now) means a lot, I would think. It's hard to get much lower than 4 percent.

  5. Anandakos

    Part of the rapid rise in housing values is the cost of the next unit. It is rising rapidly because the cost of labor has gone through the roof [yes; a bad pun]. Guys can only swing a hammer for so long before their joints start to crumble, and there aren't THAT many women who want to start. To be clear, I mean that in a COMPLIMENTARY way; the women recognize that it's trading their bodies for cash-flow.

    The point is, that as the workforce ages, there aren't enough limber skeletons being added to keep the hammers banging. If it weren't for immigrants -- legal and illegal alike -- construction of wood-frame buildings would grind to a halt.

    Yes, of course this is "exaggeration", but it's a big part of the cost equation. A developer has to have a family that can afford a $2,000/month mortgage clamoring for a new house before she or he breaks ground on the structure. And double that in the west coast cities where land is really expensive.

    What to do about it? Easing zoning, FAR, and setback straightjackets can help, but even if SFH zoning were completely outlawed in places like North Seattle, the Sunset or West Hollywood, the land under each of the bungalows can't be assembled for a high-density project, because each house will be 20% more than the last one purchased, until the final "holdout" gets $10 million because so MUCH has already been committed on the others. So nobody starts the process. Sure, you get tear-downs wherein a bungalow is replaced by a near-zero Big Box, but still for one family, just bigger.

    ADU's of one form or another help, but most of the bungalow lots can only hold one, and then you end up with more cars parked on the street.

    The truth is that we've built ourselves into a serious problem, and, while swapping propulsion systems on SOV's might help with GHG emissions, it won't help with traffic.

    1. Justin

      If it weren't for immigrants -- legal and illegal alike -- construction of wood-frame buildings would grind to a halt.

      And you think that would be bad. But lots of other people think that would be ok. Why is this bad?

      1. Anandakos

        Well, this is an article about a housing shortage. Most housing is wood-frame. It seems pretty obvious that a cessation -- actually a downturn -- in the capacity to build new wood-frame housing would exacerbate the shortage.

        i didn't think that needed to be stated.

    2. SnowballsChanceinHell

      "Guys can only swing a hammer for so long before their joints start to crumble, and there aren't THAT many women who want to start. To be clear, I mean that in a COMPLIMENTARY way; the women recognize that it's trading their bodies for cash-flow."

      The level of cringe ...

  6. tigersharktoo

    No mention of the price of land? In Coastal Southern California most of the easy land to build has been built on. Flat or flatish areas. Hilly areas coast more to build on as developers have to more more dirt.

  7. jamesepowell

    One thing seldom mentioned in these discussions is that people who own their homes - and especially the approximately 30% who have paid off their mortgages - would not really want their homes to be "broadly affordable."

    1. cmayo

      Bottom line: Kevin lives in California so thinks only California is the exception to his "there's no crisis" contrarianism. He can't help himself.

    2. Anandakos

      Second least affordable does not mean "the second highest-priced". People make ca-ca in Montana; there's absolutely no tech industry. It's almost completely a tourism and natural resource extraction economy, and the folks who take the tickets, sling the hash, dig the holes and chop down the trees don't get paid very much.

  8. cmayo

    Price of housing is up a lot vs. inflation, but we don't have a housing crisis.

    Rental vacancy rate is very low in all the major cities (because people want to move there), but we don't have a housing crisis. It's actually a bit surprising to me that the national vacancy rate is what I'd now call as "too low" because there are places people are moving away from, but I guess the crisis has just gotten THAT bad.

    Housing construction still hasn't made up for the units that were never built during the housing bust of the 2010s, but we don't have a housing crisis.

    More people than ever before are housing-cost-burdened and the number gets higher every year, but we don't have a housing crisis.

    Some people (i.e., KD and housing crisis skeptics) have their houses and everything's fine for them, so we don't have a housing crisis.

    Everybody's (who already has any) wealth is going up on the whole, so we don't have a crisis. Nevermind that a lot of that wealth for normal people is tied to housing prices, which is going up faster than it should because of artificially constricted supply (as well as normal supply constrictions, such as more demand for trades workers than there is supply, which is only going to get worse)... this is something like 44% of people - their only source of net worth is their house. But nope, no crisis.

    That's the trouble with the housing market. Because everybody needs housing, everybody thinks they're an expert. But they're not.

    1. bobwoody

      There are holes to be poked in Kevin's story, for sure. But you are just asserting things without proof, such as "More people than ever before are housing-cost-burdened". Furthermore, you have an incoherent paragraph about how "wealth for normal people is tied to housing prices" which means high prices are a problem, why?

      This isn't a convincing refutation.

        1. Anandakos

          rent-burdens-more-people-ever

          Um, do you really think that the people who lived five to a room in New York tenements in 1910 were "less cost-burdened" than people today? The problem with most people blathering on the Intertubes is they have no historical context.

          "Oooooh, an elitist libtard!" you're going to say, in which case I'll say "Fuck you, you selfish ghoul!" which is neither "intellectual" nor "elitist lib". But ipso facto true.

          And the same goes for you cmayo. "Ever before" is a long time. It's perfectly fine to say, "in the last forty years" [maybe; it would be hard to determine though]. If might FEEL like "forever", but it's not. We have had it pretty fucking good in these United States since World War II, but the MAGAts are doing their damndest to ruin the best 320 million participant economy in the history of the Solar System, if not the Local Group.

        2. SnowballsChanceinHell

          There is an element of cost disease here. If the productivity of the housing sector is increasing more slowly than the productivity of the economy as a whole, costs will tend to rise in the housing sector.

          Btw - this is another reason why the whole "we will pay for elder care using productivity gains elsewhere in the economy" is such horseshit. Productivity gains elsewhere in the economy will make elder care more expensive, creating intense social pressure to dispose of the elderly in an efficient, Canadian manner.

      1. cmayo

        Everything I've asserted I have exhaustively linked on previous Kevin posts displaying idiotic blinders to the housing crisis. I'm tired of finding them again and again and again.

        Maybe you could walk your little fingers on over to google. You'll find it pretty quickly. I note that the person who responded to you already did so for one of them.

        And FuRtHeRmOrE, if wealth for normal people is tied to housing prices it poses two obvious problems. First, it leaves people vulnerable to shocks in the market (e.g., if we ever have a housing correction it will wipe out a lot of wealth). Second, when people are locked out of owning housing wealth they are also locked out of having any wealth. Both of these things are unequivocably bad. Use that brain of yours.

        There's a third problem, which is that city managers have essentially become wealth managers in many cases. Because so much of people's wealth is tied up in housing values, they have an enormous interest in the price of housing NOT decreasing. It can only ever go up, or at least stay the same. This makes it so much harder to solve our housing crisis because 40%+ of the country has a huge economic interest in NOT solving it. On top of THAT, localities are hugely dependent upon property tax values and so they also have an interest in not lowering their tax base. Especially considering how so many localities already struggle to pay for services and maintenance of infrastructure.

        I'm already annoyed that I had to do so much of that thinking for you, but I guess on the plus side those are all just the really obvious things that don't require much thought to realize. Use that brain!

        1. SnowballsChanceinHell

          "wealth for normal people is tied to housing prices..."

          As opposed to what? Stocks? Bonds? Doubloons in a sack under a mattress? Housing is a comparatively stable store of value.

          "Second, when people are locked out of owning housing wealth they are also locked out of having any wealth."

          About half the population is locked out of having any wealth by the simple fact that their incomes barely exceed their expenditures.

          "Especially considering how so many localities already struggle to pay for services and maintenance of infrastructure."

          https://imgflip.com/i/978zqh

  9. Yikes

    Well, speaking as a Californian, I don't think you can just use "new units" compared to population. In, as someone pointed out above, a US plan where we are talking about single family lots eventually I don't care how many new ones you build they end up too far away.

    And, at this point in our history, its not as if we ran out of land 200 years ago, this is just happening now. This generation is the first generation to have to make across the board compromises in terms of location.

  10. tomtom502

    A good analysis has to look at wages vs. rent/prices by region

    A lot of housing in areas with few good jobs; that is the story on much of the country. We need the housing where the jobs are!

    I live in Seattle, there are lots of jobs. But for years now story after story comes out in the local press that rents outpace median wages. Median wage is $76,000, average rent for a 2-bedroom apartment is $2700 - $3000, 45% of median wage.

    Seriously, I go to the grocery store and wonder how the workers are making it. The homeless tents outside are part of the answer to that question.

    It ain't just California. The nation is too varied to assess the problem using national averages.

  11. James B. Shearer

    "... Let's start with the popular notion that red tape and zoning are making it impossible to build housing. .."

    Bit of a straw man here. The claim isn't that this sort of thing makes it impossible to build housing just that it makes it more expensive. Make it $200,000 an unit more expensive to build and the market will clear at a higher price with fewer houses built.

    1. Jim B 55

      But the price will not be higher, because the price of land will fall if it is more expensive to build. House prices are finance limited. If we seriously wanted to make houses more affordable (which we don't because house owners vote), we would start by increasing down payment requirements, increasing interest rates, stop corporates buying up land, taxing empty houses AND building more public housing.

      Lack of regulation doesn't get you cheaper houses, it gets you bigger, poor quality houses

  12. D_Ohrk_E1

    New single-family housing starts / new 2-4 unit building starts: https://fred.stlouisfed.org/graph/?g=1wnmi

    Using 2-4 unit structures is helpful in tracking duplexes, triplexes, and quadplexes. What you see is the spread of restrictive single-family zoning, starting in the 70s, resulting in the ratio of SFH/multiplex housing rapidly increasing.

    Recent changes in the loosening and/or the removal of SFH zoning in some parts of the country (Minneapolis, Oregon, Washington, California) need time to feel the effects.

    One of the more promising tools is the Tiny Houses prescriptive code in the IRC, Appendix Q / AQ. For technical reasons, it cuts back on the margins of costs of building a home in compliance with current residential building codes.

    If I were in charge of national policy:

    - I would push to have the 450SF base floor area limitation of the Tiny Houses code increased to 500SF.
    - Ban SFH zoning in cities with populations greater than 500K.
    - Add a federal matching subsidy to local TIFs and SDCs so as to allow the expansion and improvement of infrastructure to accommodate the rapid and affordable growth of multiplexes.

    1. D_Ohrk_E1

      One additional policy:

      - A federal program to buy down mortgage/loan points for ADUs, multiplexes, and Tiny Houses, with 10-year no re-sale requirements.

  13. SC-Dem

    On the other side of the equation: Would it help to make housing more affordable if the bottom 90% of the population had an average household income around $35k/yr higher? That's what it would be if the distribution of personal income had stayed the way it was prior to the ascendancy neo-liberal economics during the Reagan era.
    Billionaires are a nuisance and should be outlawed.

    1. Anandakos

      I think that would just push up the prices of the houses, since more people would be competing for the limited stock. The answer is for hot companies to open genuine satellite offices in the Great Lakes States whose cities, with the exception of Chicago, have plenty of usable capacity. People move to places where there are jobs. Nobody is going to move to Tucumcari unless they're really poor or have a tumbleweed fetish.

      I would modify your last paragraph. "Billionaires should be shorn of their wealth when they die. Let them invent great new things and get rich. But no born-on-third-base "trust funds" for their offspring."

  14. danton

    Something that explains part of the gap between rapid price increases and relatively flat construction rates per new-25yo is the recent decline in household size. This is centered on renters, but also impacts homeowners, and suggests that the market changes may be particularly unfavorable for single people and small families (assuming that builders haven't begun building more studio-1bedroom apartments, which they likely have if this assessment is accurate).

    Data: According to the American Community Survey, in areas with populations of 65000 or more, the number of occupants per home was basically flat for both owned and rental units from 2010-2017. From 2017-2023, however, there's been a ~10% decrease in occupants per rental unit, followed by a less dramatic 3% decrease in occupants per owned unit from 2019-2023. This is also consistent with a widening gap between family size of homeowners and renters. The numbers including rural areas are only published as 5-yr averages, so they're less current and have smaller changes, but they show a similar trends through 2022.

    https://data.census.gov/table/ACSDT1Y2023.B25010?lastDisplayedRow=10&table=B25010&hidePreview=true&q=B25010:%20AVERAGE%20HOUSEHOLD%20SIZE%20OF%20OCCUPIED%20HOUSING%20UNITS%20BY%20TENURE

    1. jdubs

      This is an important piece of data. Kevin leaves it out of every attempt to show there is no housing crisis, but it is critical to explain what is going on with prices, availability and vacancies.

  15. emjayay

    Something I've seen talked about as the savior for high housing prices over and over for years is some kind of factory built houses. Premade modular housing can be pretty high quality although the concept goes from trailers up to that and everything in between. I know someone in Maine who had a high quality one built in a matter of days (after the foundation/utilities/driveway etc. were done.)

    But any form of that being any kind of solution is an illusion. A teardown or small empty lot where I live in Brooklyn or where my sister lives in Van Nuys (the lowest rent area on the wrong side of the mountains from central LA in the Valley) is going to cost $600-800K. The cost of the house itself is not the major factor and the related infrastucture is the same cost, and a modular one is not going to be dramatically cheaper even just in itself.

    After many decades of population loss (not as dramatic as Cleveland) where I grew up in the Buffalo NY area has gained a little. Maybe because of that but mainly just because of the overall picture house prices have about doubled there over 10 years (maybe X 1.5 considering inflation). But a 50x140' lot in my old Cheektowaga nabe was for sale recently for around $35K! Move there everybody. You might want to buy a snowblower though.

  16. Art Eclectic

    All this chatter and not one person mentioned the MILLIONS of units off the market because they have been turned into short term rentals. Those are a cancer and need to be severely restricted.

    1. cmayo

      While bad, this is a marginal effect and just a boogeyman/distraction. Add more supply and it becomes a non-issue. It's not like these things sit vacant - if they do, they return to the regular market.

      Also, there aren't MILLIONS. In 2023, there were 1.2 million. In total. Not just Airbnb. If you put 1.2 million housing units back on the market tomorrow, we'd still have a supply shortage of at least 3.3M+. And it's not like short term rentals don't fill some kind of demand - there would be knock-on effects in other areas that would be hard to figure out. I know for a fact that some portion of the short term rental listings are simply resort slots listed under another system for convenience, and those aren't always exactly suitable to be actual dwelling units.

      Anyway... a simple google result for you.

      https://www.vox.com/technology/2023/6/30/23779862/airbnb-collapse-housing-shortage

  17. Crissa

    You do realize we losing housing, right?

    Some ages out, some gets destroyed, others get consolidated, and some get lost to fire?

    Population growth counts deaths.. but housing starts count flooded, burned houses being restored, and doesn't count units destroyed.

  18. shapeofsociety

    Your first chart starts in 1985. My understanding is that the red-tape rules that have strangled building were put in place long before 1985. Don't discount the possibility that you are looking at a solid 40 years of perpetual underbuilding. What happens if you go back to 1950?

    1. BriPet

      This! Affordable housing advocates have been warning for decades that we’re under-building affordable housing. Why are people acting so surprised that it’s caught up to us?

  19. gbyshenk

    A look at another part of the problem, also related to the timing issue:

    "And it’s puzzling why there isn’t more construction. One reason, posited by a noisy group who self-identify as “YIMBY’s,” which stands for “yes in my backyard,” argue there are too many local rules limiting development put forward by annoying people that want to maintain the local character and high housing values of their neighborhood by keeping others out. And yet, just pointing at over-regulation in and of itself isn’t a satisfying explanation. After all, the collapse in housing starts really began in 2007, and it hasn’t rebounded. Something is wrong with the market, as price signals aren’t working."

    https://www.thebignewsletter.com/p/its-the-land-stupid-how-the-homebuilder

Comments are closed.