A common belief in the United States is that there’s a housing shortage, and this idea even shapes national policy.
The Biden administration, for example, plans to address what it sees as a housing supply shortfall.
However, new research from the University of Kansas (KU) reveals a different story: most American housing markets actually have enough homes, but not enough of them are affordable for very low-income families.
Kirk McClure, a professor emeritus at KU, and Alex Schwartz from The New School co-authored a study published in the journal Housing Policy Debate.
They looked at U.S. Census Bureau data from 2000 to 2020 to see if there were more households needing homes than homes available.
Their findings were surprising. Out of 381 metropolitan areas, only four had a housing shortage.
Similarly, only 19 out of 526 smaller “micropolitan” areas, which have 10,000-50,000 residents, experienced a shortage.
This means that, overall, the U.S. has enough homes. The real issue is that many of these homes are not affordable for families with very low incomes.
McClure explained that while there’s a widespread belief in a housing shortage, the data shows that most American markets have enough housing. The problem is affordability, especially for low-income families.
The study also looked at two specific income groups: very low income, defined as 30% to 60% of the area’s median family income, and extremely low income, which is below 30% of the area’s median family income.
Between 2010 and 2020, the number of households formed did exceed the number of homes built. However, the surplus of homes built between 2000 and 2010 more than made up for this shortfall. In fact, from 2000 to 2020, housing production exceeded household growth by 3.3 million units.
While there are enough homes for people to buy, nearly all metropolitan areas lack affordable rental units for very low-income families.
The study also considered vacancy rates, which measure the difference between total and occupied units.
National vacancy rates were 9% in 2000, 11.4% in 2010 (following the housing bubble and the Great Recession), and 9.7% by the end of 2020. This means there were nearly 14 million vacant homes by 2020.
McClure noted that just looking at the number of housing units shows there’s no overall shortage. However, many factors affect whether a home is truly available, such as if it’s habitable and its cost. Families also need homes that meet their specific needs, like enough bedrooms or accessibility for disabilities.
The study found that while some markets might have shortages, others have a surplus. Across the nation, metropolitan areas had 2.7 million more units than households, and micropolitan areas had a surplus of about 300,000 units over the 20-year period.
The real problem emerges when considering renters. McClure and Schwartz compared the number of units affordable to renters earning 30% to 60% of the area’s median family income. They found that most metropolitan areas have enough owner-occupied units, but lack affordable rental units for very low-income households.
The authors suggest that helping people afford the existing housing stock is more cost-effective than building new homes. They argue that our nation’s affordability problems stem from low incomes facing high housing prices.
Therefore, instead of building more homes in hopes that prices will drop, we need to address the price levels and income levels directly.
In summary, the U.S. has enough housing, but the affordability crisis means many families can’t afford the homes available.
Addressing this issue will require tackling both housing prices and income levels, rather than simply increasing the number of homes.
Source: University of Kansas.
