US Housing Underproduction Report ReleasedJohn Lambo - Jul 19 2022
Housing shortage as far-reaching implications for Americans and the economy
Up for Growth, a cross-sector member network committed to solving the nation’s housing shortage and affordability crisis through data-driven research and evidence-based policy, released a groundbreaking report last week on housing underproduction in the United States.
Up for Growth’s 2022 Housing Underproduction in the United States Report is a first-of-its-kind longitudinal study tracking nationwide housing underproduction by county and metropolitan area. The report is the most detailed analysis of local housing underproduction ever produced. The report, in part, measures the gap between the number of homes available versus those needed.
California ranks first in terms of the severity of its housing deficit. Housing underproduction in California has reached 977,654 homes, an increase of 82 percent since 2012.
The average U.S. state had a housing deficit of 79,000 homes. As a percentage of total housing stock, states with the most severe housing underproduction were, in order of severity: California, Colorado, Utah, Oregon, Washington, Washington DC, Arizona, Minnesota, New Jersey, and Massachusetts. New to the list since 2012 are six states: Nevada, Missouri, South Carolina, Rhode Island, Oklahoma, and Mississippi.
Although California has the most severe housing deficit, The shortage has become a national issue and its repercussions are vast and long-lasting.
Freddie Mac has estimated that the nation is short 3.8 million housing units to keep up with household formation.
In 2012, the nation’s affordability problem was concentrated on the coasts and in the Southwest. Today, 47 states and the District of Columbia, and 169 metropolitan areas have seen underproduction rise over the past seven years according to the Up for Growth Report.
The housing shortage has become a quality-of-life issue for many Americans. More families in the middle of America who could once count on becoming homeowners may not be able to do so any longer. And communities that long relied on their relatively affordable housing to draw new residents are losing that advantage.
Research shows that the shortage of affordable housing costs the American economy about $2 trillion a year in lower wages and productivity. Without affordable housing, families have constrained opportunities to increase earnings, causing slower GDP growth.
America’s housing shortage has been a problem for years – especially since the market contraction after the 2006 housing bubble burst, and was soon followed by the Great Recession.
In the year leading into the pandemic, three-quarters of 310 metropolitan areas nationwide were already dealing with dwindling supply or growing deficits. The pandemic only emphasized the issue with lifestyle changes and rising rents and home prices.
New home construction
New home construction will not be significantly alleviating the housing shortage any time soon. The industry is at it’s slowest pace since 1995.
Single-family home construction has suffered from a severe labor shortage that began well before the pandemic but was then exacerbated by it. Supply chain disruptions, labor shortages, and local politics in the past two years have pushed prices for building materials higher, and as pandemic-induced demand soared, prices for land increased as well.
The amount of housing to build to alleviate the housing shortage to any degree is a difficult question to answer. Historical data, changing demographics, assumptions like potential or future homebuyers, etc. all need to be taken in consideration.
For example, about 12.3 million American households were formed from January 2012 to June 2021. However, only 7 million new single-family homes were built during that period, CNBC reports. According to the Up for Growth Report, housing underproduction has reached 3.79 million units – up from 1.65 million units in 2012. Also, to be considered is the fact that many people in need of housing are not, in fact homeless. Many are living with family or friends.
Builders would need to double the new-home production pace to make up the gap in five to six years.
In the upcoming issue of Mobility Magazine, Laura Levenson, GMS-T Practice Leader, consulting and advisory services, Weichert Workforce Mobility, states that, “It’s hard to know what’s going to happen. Even as construction picks up, pre-pandemic and pandemic-era backlogs have to be filled.”
“At the end of the day more buildings have to be built,” Levenson says.
Addressing the issue
Each dollar invested in affordable housing boosts local economies by leveraging public and private resources to generate income—including resident earnings and additional local tax revenue—and supports job creation and retention.
To address housing underproduction, the Up for Growth report lays out a framework that prioritizes the creation of homes in areas with high economic mobility and access to jobs and existing infrastructure. It also pinpoints the three main drivers of housing underproduction nationwide – insufficient availability, uninhabitable units, and missing households, which refers to the increase of more unrelated people choosing to live together, preventing new households from forming.
The Housing Underproduction report also offers policymakers a new and innovative framework to help create more homes while also improving equity, community resilience, and addressing drivers of climate change.
The report’s data finds that building 3.8 million additional homes would create increased housing affordability, add $209 billion to the U.S. GDP, generate $7 billion in additional local revenue, and reduce C02 emissions to the equivalent of 7.7 billion fewer miles traveled annually at full buildout.