![]() ![]() Additionally, labor shortage s and the cost of building materials have increased in recent years.Īnother key factor driving limited housing supply is local zoning restrictions. For example, while the greater Los Angeles area, which is experiencing a housing crisis that disproportionately affects people of color, currently has 84 golf courses (including eight municipal courses in Los Angeles proper) occupying an estimated 10,000 acres of land, a single 200-acre course could potentially provide housing for 50,000 people. Part of the shortage of available land reflects public policy decisions of municipalities about how to use land. Many urban and suburban markets suffer from a shortage of available land. The dearth of housing supply in the United States is caused by a range of factors and varies between markets. These dynamics mean that the critically important “bottom rung” of the home-ownership ladder is far too out-of-reach for young families trying to start building housing wealth. Similarly, entry-level homes are becoming a smaller fraction of the new homes that are being completed, representing less than 10 percent of all newly constructed homes, compared to roughly 35 percent in the 1970s. One of the most important is that the number of new homes constructed below 1,400 square feet-typically considered “entry-level” homes for first-time homebuyers-has decreased sharply since the Great Recession and is more than 80 percent lower than the amount built in the 1970s. The above analysis looks at the housing market in aggregate, but there a large and portentous differences between segments of the market. Researchers at Freddie Mac have estimated that the current shortage of homes is close to 3.8 million, up substantially from an estimated 2.5 million in 2018. Housing starts as a share of the population decreased by roughly 39 percent in the 15-year period from January 2006 to June 2021. This decrease became particularly pronounced after the peak of the 2000s housing bubble. The figure above shows that housing starts as a share of the population has been on an overall decreasing trend since the 1970s. A simple way to observe this fact is by looking at housing starts ( i.e., new residential construction) as a share of the U.S. Through both legislative and non-legislative measures, these policies have the potential to create or rehabilitate over 2 million housing units, including at least 1 million rental units, based on HUD estimates from past program performance.įor the past 40 years, housing supply has not kept pace with population growth. In the blog, we describe this perennial problem and outline the Administration’s wide-ranging proposals, including those in the Build Back Better agenda, to address the supply shortage and reduce price pressures in the housing market. The pandemic exposed these constraints that have been around for decades and have impacted households across the income distribution. While the pandemic may have transformed preferences and caused supply chain disruptions, it did not create the underlying supply constraints in the housing market, which have decreased the stock of rental homes and homes for-sale. Home prices outpaced income growth in 2020, with the national price-to-income ratio rising to 4.4-the highest observed level since 2006. Indeed, national home prices, as measured by the Case-Shiller Index, increased by 7 to 19 percent (year-over-year) every month from September 2020 to June 2021. These pandemic-related changes interacted with the existing housing inventory shortage, resulting in sharp price increases for both owned homes and rental units. The COVID-19 pandemic shifted families’ preferences for location and type of housing, exacerbating existing supply chain constraints that-for several reasons-have persisted for many years. Get Involved Show submenu for “Get Involved””īy Jared Bernstein, Jeffery Zhang, Ryan Cummings, and Matthew Maury.The White House Show submenu for “The White House””.Office of the United States Trade Representative.Office of Science and Technology Policy.Executive Offices Show submenu for “Executive Offices””.Administration Show submenu for “Administration””. ![]()
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