A recent Zillow report reveals that the primary cause of the ongoing affordability crisis stems from a notable shortage of affordable housing. This shortage disproportionately affects Millennials and Gen Z, who are currently in the prime stage of their lives for purchasing a home. As first-time buyers, they often lack the financial resources beyond a down payment to contribute towards a mortgage.
The ongoing shortage of affordable homes emphasizes the necessity for new government policies and investment opportunities that can stimulate construction projects. This scarcity of affordable options has resulted in the emergence of “missing” households, referring to potential homeowners residing with family members in either owned or rented properties.
Zillow’s 2021 report indicated that there were nearly 8 million missing households, while only 3.7 million housing units were available for rent or sale, resulting in a deficit of 4.3 million homes. Furthermore, for every available housing unit, there were over two potential households in need of their own homes, leaving 4.3 million households without suitable housing.
Zillow also found that the majority of families living together had significantly lower combined incomes, emphasizing the demand for smaller, more affordable housing. Specifically, 68% of those doubling up had an annual income of $35,000 or less.
The disparity between individuals in need of housing and the availability of affordable options is further amplified by costly housing markets, particularly in high-priced coastal regions and select major metropolitan areas located inland.
Addressing this issue requires proactive measures. According to Zillow, the decline in construction activity relative to the overall economy since the 1960s needs to be tackled. Land-use restrictions, delays in building approvals, and limited growth in the construction sector all contribute to the shortage of new homes nationwide. Policymakers must explore strategies to enhance production and promote the overall expansion of the construction industry, enabling housing supply to meet the demand.
Moreover, crucial governmental changes in zoning laws are necessary to alleviate housing costs. Zillow’s public polling indicates that four out of five adults support the construction of more smaller home types within their neighborhoods. Researchers also propose expediting building permits, eliminating parking requirements, offering tax incentives for revitalizing underutilized housing, and expanding affordable housing trust funds as potential solutions to alleviate the shortfall in new construction.