Housing Shortage in the US

Update 514 – Housing Shortage in the US:
Problems, Solutions, and Odds of Reform

The pandemic and its ensuing economic crisis have brought manifold housing challenges to the fore for both renters and owners. The rent remains too high and homeownership still beyond the means of too many people. The consensus view: the housing stock of the nation needs to be increased as it serves as a cornerstone for the economy at-large.

Generally, the federal government isn’t looked to for solutions to housing issues — the programs that do exist are a mere speck on the overall budget. And while most of the programs that do exist are aimed at low-income Americans, other options, like the mortgage interest deduction, aim to help those that are already financially stable. The Federal Government’s housing priorities are off-kilter but we now have an opportunity to do something about it.

Below we examine the current housing crisis and policy to address the crisis in the short- and long-term.




Yesterday, the Senate Banking Committee hosted its first hearing on the state of housing in almost nine years. The hearing focused on a range of issues but homed in on addressing the current affordability crisis, rooted in a chronic supply issue. Restrictive zoning laws at the state and local level, underfunding of public housing at the federal level, and market factors have reduced the supply of affordable homes, especially for low-income families. 

The Affordability Crisis 

The housing market has led the ongoing economic recovery, as record-low mortgage rates and a desire for more space pushed more Americans to buy homes. Between 2020 and 2021, home prices increased by roughly 10 percent, with prices increasing most for the market’s lower-end. But while the housing market reaches new heights during the pandemic, renters and homeowners are in a perilous position. Nearly one in five renters is behind on rent and over 10 million homeowners are behind on mortgage payments. 

Even before the pandemic, the country faced an affordable housing crisis, impacting every community in the country. The roots of this crisis date back to 2008, when many homebuilders went out of business. Those that survived shifted focus to higher-cost housing, where more money could be made. This shift has resulted in a shrinking stock of affordable housing. Lack of supply means higher prices for renters and home-buyers alike, widening the gap between what most people earn and current housing costs.

The effects of the affordability crisis are seen most clearly in homeownership levels and the price of rent.

  • Homeownership: Homeownership remains the most common avenue for low- and moderate-income families to build wealth, but rates among adults below 50 are five percentage points lower today than in the early 1990s. At yesterday’s hearing, Sen. Smith (MN) noted the persistent and increasing disparities in homeownership opportunities for people of color. The Pew Research Center found that 75 percent of white Americans owned a home, compared to 50 percent of Hispanic Americans, 46 percent of black Americans, and 61 percent of Asian Americans. 
  • Rent: Rent prices increased by roughly 20 percent between 2000 and 2019. Higher prices and a lack of new, affordable homes have resulted in a growing share of renters who are cost-burdened or spending more than 30 percent of their household incomes on housing. In 2019, roughly 46 percent of all renters were cost-burdened, while 24 percent were severely cost-burdened (spending more than 50 percent on housing) per the Joint Center for Housing Studies. While this is particularly impactful for renters making less than the federal poverty rate, affordability issues are not just unique to low-income renters. 

Rent Cost Burden by Household Income from 2006–2018

Source: JCHS tabulations of US Census Bureau, American Community Survey 1-Year Estimates.

Pandemic Issues/Short-Term Solutions

A series of executive actions and the recently-passed American Rescue Plan (ARP) go a long way toward supporting renters and homeowners. At the start of his presidency, Biden issued executive actions to extend the federal eviction moratorium, the foreclosure moratorium for homeowners, and the mortgage payment forbearance program. These actions temporarily prevented millions from potentially losing their homes. 

The ARP contains billions in housing-related aid. Unlike past relief packages that contained only housing protections with indirect assistance, the ARP provides direct homeowner and rent relief. Some notable provisions include, in order of amount of assistance:

  • $21.6 billion for emergency rental aid
  • $9.9 billion to the Homeowners Assistance Fund, which helps homeowners in need pay overdue mortgage bills, taxes, insurance, and HOA dues
  • $5 billion for fighting homelessness (through the HOME Investment Partnerships Program)
  • $5 billion for emergency housing vouchers
  • $4.5 billion for homeowners and renters to pay for heating and cooling costs
  • $750 million for housing needs in Native American communities
  • $139 million for rural housing
  • $120 million for housing counseling

ARP assistance is well-targeted, taking into account household income and employment status. But Sen. Menendez observed yesterday that these actions alone may not prevent struggling families from losing their homes. The CARES Act, coupled with actions taken by FHA, FHFA, and Fannie and Freddie Mac, has provided many homeowners a lifeline, yet an estimated 1.8 million mortgages will be seriously delinquent when foreclosure moratoriums on government-backed loans finally begin to lift. The ARP’s Homeowner Assistance Fund was set up to help those in this situation, but the $9.9 billion fund may not be enough.

Affordability Crisis/Long-term Solutions

Beyond the pandemic, the administration faces a much longer-term affordability crisis rooted in a shortage of affordable housing stock. Sen. Warren focused on the supply-side issue at the hearing yesterday. Responding to Sen. Warren, Diane Yentel of the National Low Income Housing Coalition (NLIHC) noted that for every ten low-income households, there are fewer than four available and affordable units. Per Yentel, the current shortage of affordable homes, especially rental homes, is caused by persistent market failure, outdated zoning laws, and chronic underfunding of solutions. 

The private market alone cannot solve the crisis, and government intervention is necessary to ensure decent homes are available and affordable for lower-income individuals. Yesterday, witnesses and lawmakers discussed legislative solutions to the current crisis that directly address supply, including: 

  • Housing Trust Fund (HTF): Congress consistently underfunds housing subsidies, resulting in only one in four households eligible for and in need of assistance receiving any. To expand the affordable housing stock, Congress could increase funding to the national HTF, which provides affordable housing construction, preservation, and operation grants to states. Warren’s Housing and Economic Mobility Act, introduced in the 116th Congress, would fully fund the HTF at $44.5 billion, allowing states and cities to invest in affordable housing for low-income renters. 
  • Existing Public Housing: The NLIHC estimates that roughly 10-15 thousand public housing apartments are lost each year due to obsolescence or decay. The total funding needed to address capital repairs in public housing is around $70 billion today. Rep. Velazquez’s Public Housing Emergency Response Act from the 116th Congress provides a path to preserving existing public housing by investing $70 billion to eliminate the public housing capital needs backlog and ensure public housing is safe and affordable.
  • Low Income Housing Tax Credit (LIHTC): Expanding the LIHTC is another way to empower states and territorial governments to expand affordable housing by subsidizing the construction, rehabilitation, and acquisition of affordable rental housing through tax credits. Last year, Sens. Wyden and Cantwell put forward legislation to strengthen LIHTC and support construction of 500,000 additional affordable housing units.
  • Local and State Housing Regulations: While deregulation alone is not a successful strategy for increasing affordable housing, a significant barrier is local restrictions. For any new federal investments and grants, states and localities must be required to eliminate some local restrictions that reduce affordable housing availability. 

On the campaign trail, President Biden developed a $600 billion housing plan that focused, in part, on increasing the overall supply of affordable housing. With the $1.9 trillion COVID relief package finally passed, Biden has the opportunity to enact this plan in the anticipated infrastructure bill later this year. In this next package, Democrats have indicated that they will prioritize non-traditional infrastructure such as affordable housing in addition to traditional infrastructure. Proposals that address affordable housing stock such as the ones above will be critical “building back better” at the end of this crisis. 

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