U.S. Housing Shortage Worsens Amid Construction Boom

home constructionImage by Paul Brennan

SEATTLE, WA — Despite a surge in construction during the pandemic, the U.S. housing shortage deepened in 2022, growing to 4.5 million homes from 4.3 million the previous year, according to a new analysis by Zillow. This widening deficit is a key factor driving the current housing affordability crisis.

In 2022, the number of U.S. families increased by 1.8 million, while only 1.4 million new housing units were built. This gap has exacerbated the long-standing issue of insufficient housing supply, pushing homeownership further out of reach for many Americans.

The housing market operates on basic supply and demand principles. When the number of people seeking homes outpaces the available supply, prices rise. This imbalance became acute following the Great Recession, which led to a decade of underbuilding. Compounding the problem, millennials, the largest generation in U.S. history, reached prime home-buying age. The result has been a worsening affordability crisis, now made more severe by persistently high mortgage rates.

“The simple fact is there are not enough homes in this country, and that’s pushing homeownership out of reach for too many families,” said Orphe Divounguy, senior economist at Zillow. He pointed out that nearly half of renter households are also cost burdened. “Filling the housing shortage is the long-term answer to making housing more affordable,” Divounguy added.

The deficit is stark. In 2022, the U.S. had approximately 8.09 million “missing households” — individuals or families living with nonrelatives due to lack of affordable housing. In contrast, there were only 3.55 million housing units available for rent or sale, highlighting a shortfall of over 4.5 million homes.

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The pandemic did spur a construction boom, resulting in 1.4 million new homes in 2022, the highest annual total since the early stages of the Great Recession. However, this was still insufficient to meet the growing demand, let alone reduce the existing deficit.

A region’s land-use regulations significantly impact housing affordability, Zillow’s research indicates. Areas with stringent land-use rules, as defined by the Wharton Residential Land Use Regulatory Index, tend to have lower housing affordability. Even regions with higher-than-average incomes struggle with affordability due to persistent supply shortages.

The implications of this ongoing shortage are profound. Without significant changes in housing policy and construction practices, the dream of homeownership will remain elusive for many Americans. Addressing the housing shortfall requires more than incremental changes; it demands a concerted effort to boost supply and ensure that new homes meet the needs of the growing population.

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