'This Just Isn't Sustainable': The Housing Affordability Crisis Is Accelerating
Decades in the making, the U.S. is facing a worsening housing shortage that is pushing housing prices and rents higher, and signs are pointing to it getting worse before it gets better.
Experts estimate the country needs to add 2 million housing units per year to accommodate a population that grew by 7.4% over the past decade, according to the recently released 2020 U.S. census data. But last year, the country produced just 1.3 million units of housing, and construction prices, labor shortages and restrictive zoning and building codes are making it unlikely the gap is going to shrink anytime soon.
“This just isn't sustainable. The unavoidable reality is we need more rental housing in this country, both single-family and multifamily,” National Rental Home Council Executive Director David Howard said in an email. “There are powerful demographic, social and economic trends pushing the demand for rental housing higher and higher.”
Two decades of underbuilding have led to a 5.5 million-unit shortfall across the country, according to a June study by the Rosen Consulting Group and the National Association of Realtors. The gap widens to 6.8 million housing units when taking into account the loss of homes through demolition, natural disaster or functional obsolescence.
To address the shortage, builders would need to ramp up their annual production by 60%. The repercussions are evident in the nation's for-sale market, where the average sale price rose 48.5% over the past decade, from $173K to $257K, according to Zillow.
Even as the economy took a severe hit during the recession, apartments rents continued to rise last year, with one-bedroom unit rents jumping 7% and two-bedroom units climbing 8.7% year-over-year as of July, according to Zumper. Continued low-interest rates are aiding more consumers to enter the homeownership market. But in California, builders are not keeping up with anywhere near the demand from buyers, sparking bidding wars for the homes that hit the market, First Class Real Estate Managing Broker and owner Stacy Carter said.
Carter's focus is on the Riverside County housing market, a bedroom community for San Diego and Los Angeles. Average housing prices in Riverside have jumped more than 25% to $518,300 in the past year alone, according to Zillow.
“We are definitely behind when it comes to new builds by thousands of homes,” said Carter, who is also on the board of the National Association of Real Estate Brokers. "As much as they are building they can't keep up with the current inventory. There are multiple bids on brand-new properties."
For low-income households, these trends only exacerbate their financial pain. The wages needed to afford a modest one-bedroom or two-bedroom rental home are between $20 and nearly $25 per hour, according to a 2021 report by the National Low Income Housing Coalition. The pool of available low-income housing also has shrunk in the U.S., with only 37 affordable units for every 100 extremely low-income renters.
“It's also a gross income inequity problem,” said Rachel Rintelmann, a supervising housing law attorney with the Legal Aid Society of the District of Columbia. “There isn't a single ZIP code in the United States where you can afford a single-bedroom apartment on minimum wage.”
Most new multifamily development targets the luxury or young professional class, and while in theory, adding new units of any kind should have a trickle-down effect to lower-income households occupying older units, that has not happened in practice.
The eventual expiration of the eviction moratorium also will have the effect of spiking the demand for low-income housing, Roller said, as those who are ousted from their current units have fewer options to avoid homelessness.
“If you walk out with an eviction record, there's a big swath of the housing market that's not available to you,” Roller said. "That means in practice you're going to lower-quality housing ... in less desirable areas of town."
Even as the $1.2 trillion infrastructure bill that passed the Senate last week includes a provision to infuse $213B to help preserve more than 2 million affordable housing units, it would take years to actually stop the bleeding in the housing market.
“The ramifications are pretty big around this. This is affecting the economy. It's destabilizing our society at this point,” Roller said. “If you're paying 50% of your income in rent, you just have very little capacity to save any money to invest in your kids' education, to invest in your own education, upward trajectory. And the sort of housing segregation that we sort of let go on is sort of contributing to the polarization we're seeing.”