Anyone trying to buy a house that doesn’t cost an arm and a leg, or hoping to land an affordable rental unit knows how difficult and frustrating that goal can be to achieve.
America has been plagued by a severe housing shortage for at least a decade with the COVID-19 global pandemic laying bare the deficiencies in the housing and rental ecosystems. A housing analysis report released by Realtor.com in March laid out the scope of the problem.
According to Realtor.com’s Hannah Jones, housing markets in the U.S. continue to struggle because of a significant shortage of new homes, as a consequence of more than 10 years of under-building relative to population growth.
Jeffrey Hayward, executive vice president and chief administrative officer with FannieMae said in a 2022 article that the causes of the housing supply crisis are widely understood.
“After the Great Recession, new home construction dropped like a stone. Fewer new homes were built in the 10 years [that] ended 2018, than in any decade since the 1960s,” he said. “By 2019, a good estimate of the shortage of housing units for sale or rent was 3.8 million. The pandemic-induced materials and labor shortage exacerbated the trend, however, as evidenced by the surge in rents and home prices in 2021.”
Hayward said increased mortgage interest rates – which The Federal Reserve has used to try to cool inflation – “have already reduced housing demand, particularly for new homes, and a possible economic slowdown could reduce demand further.”
Americans have been dealing with record high inflation and mortgage rates, amid a housing affordability crisis driven by low inventory, alarmingly high rents, and a drop in real wages.
As real estate analysts predicted, the multiple pressure points affecting housing eased this year. According to the National Association of REALTORS, housing affordability had double-digit declines from a year ago in all four regions of the country.
“The South had the biggest decline of 25.3%, followed by the Midwest with a dip of 25.1%. The Northeast experienced a drop in affordability of 22.2%, followed by the West, which fell by 19.2%, the NAR said. “Affordability was up in all regions from last month.”
But even as housing market prices and rents have begun to stabilize and fall in some markets, the supply issue remains acute particularly for low- and moderate-income families. A U.S. House panel report released in July 2022 said “corporate landlords” evicted tens of thousands of residents last year despite the evictions moratorium implemented during the COVID-19 global pandemic, just as private equity firms and businesses are gobbling up real estate at a record pace.
Challenges for Renters
Juan Pablo Garnham, Audience and Community Engagement Manager at Princeton University’s Eviction Lab, said those forced to rent now face obstacles because of government policies and business acquisition of property.
“In many parts of the country, there’s … been regulations that limit access to renters and low-income people, which add pressure to the market, including zoning restrictions and limitations for building more units,” Garnham said in a 2022 interview.
He said the rent squeeze is also exacerbated by “more corporate groups and LLCs buying housing in larger numbers, increasing rent prices, making it more difficult for individual buyers to compete, and potentially provoking evictions and displacement.”
In a report last year, the National League of Cities (NLC) said the U.S. suffered from a shortage of seven million affordable rental homes. In addition, renters racked up billions of dollars’ worth of debt after falling behind during the pandemic. As a consequence, the NLC said, many cost-burdened households are now spending more than half of their paychecks on rent and utilities, as opposed to the 30% level often recommended by financial planners.
Eliana Roberts Golding, Senior Policy Analyst for Housing and Workforce Development at the DC Fiscal Policy Institute, said it’s a question of economic policy priorities in a society that sees housing as a commodity and not a basic human right. Too many elected officials and policymakers, Golding added, look at housing issues in starkly financial terms.
“For example, renters can’t take any deductions, but mortgage interest deductions are available to those holding wealth through the asset of housing. And there are policy choices on the federal and local levels that we can’t undo,” Golding said.
She described the District of Columbia’s rent control policy as “very outdated,” and in need of an overhaul.
“Rent control is a way to temper markets and keep units, but it has remained stagnant and every year, we lose units,” Golding said.
Housing Crisis and Race
Golding emphasized it is impossible to discuss the housing crisis without talking about race. She said the United States has to reckon with the consequences of generations of racially discriminatory policies and programs devised by federal, state and local elected officials, corporations, stakeholders and others that has locked African Americans out of communities using redlining, restrictive covenants and barriers as well as blocking Black people from buying homes, securing loans and mortgages, and limiting the areas of cities and towns where they might live.
“The present system is built on de jure racism, discrimination, segregation and inequity. Certain places received investments and others [Blacks] didn’t,” Golding said. “As you’re investing in one place, that increases in value while causing displacement of people unable to afford homes and apartments spurring gentrification.”
Some solutions experts, analysts and advocates offer as ways to address both the housing and affordability crises is for Congress and state lawmakers to move expeditiously to expand America’s housing stock; revamp evictions laws; boost funding for rental assistance to low-income people; and remove exclusionary zoning and other laws which have historically been used to bar primarily Black and brown lower-income residents from living in more well off suburban enclaves and boost their access to jobs, quality, high-performing schools and other features.