A severe shortage of affordable housing is gripping communities across the United States. Home prices and rents have skyrocketed out of reach for many middle- and low-income earners. The housing crisis stems from several factors including limited housing supply, labor shortages, restrictive zoning, real estate investor speculation, and stagnant wages. However, creative solutions at the local, state, and federal levels can help close the housing affordability gap. Here is an in-depth look at the key drivers of the housing crisis and potential remedies.

Causes of the Housing Crisis

Limited New Construction 

Housing inventory, especially at lower price points, has not kept up with demand. On average only about 1.5 million new units are built per year, far below the 3-4 million needed to satisfy America’s growing population. Construction of starter homes under 1,800 square feet is especially lagging. Shortages of land, labor, materials, and lending have constrained builders’ ability to expand housing stock.

Labor and Materials Shortages

The pandemic severely disrupted global supply chains. Shortages of building materials like lumber coupled with lack of available construction workers have delayed projects and increased costs. The skilled trades workforce is aging, and not enough younger workers are entering the field. Rising material expenses and labor costs get passed on to home buyers, pushing prices higher.

Zoning Restrictions

Outdated zoning codes prohibit diverse, affordable housing options in many residential areas. Regulations that limit building size, require large lot sizes, or ban multi-family units entrench economic segregation. Exclusionary zoning sustains systemic inequality by blocking affordable development. Updating zoning to allow for density and flexibility would expand housing supply.

Investor Activity

Institutional investors bought nearly one in five homes sold in the U.S. in the first quarter of 2022. Deep-pocketed investors can outbid individual homebuyers, shrinking for-sale inventory. Most purchased homes become rentals with higher rates than traditional apartments. This consolidation of properties in corporate hands inflates prices and prevents families from building home equity.

Stagnant Wages

Wage growth has severely lagged housing cost increases, putting homeownership out of reach for many. The median home price rose over 50% since 2018 while average weekly earnings grew just 15%. Minimum wage has remained unchanged since 2009. Home prices have grown 5 times faster than incomes over the past 40 years. Stagnant wages hinder saving for down payments and covering rising housing costs.

Fixes for the Housing Crisis

While the housing affordability crisis has complex causes, targeted policy reforms could expand affordable housing access over time. Here are some promising solutions.

Upzoning

Upzoning changes zoning codes to allow for higher density by permitting multi-family buildings in areas previously zoned for single-family only. It reduces development costs per unit and opens up neighborhoods for varied income levels. Upzoning along transit corridors or allowing homeowners to add accessory dwellings helps cities utilize land more efficiently.

Taxing Vacant Homes

Levying taxes on unoccupied investment properties could deter real estate speculators from buying up homes as income-generating assets rather than places to live. Vacancy penalties raise carrying costs for investors, encouraging them to sell or rent out empty properties. The added revenue could fund affordable housing initiatives.

Rent Control

Capping annual rent increases protects tenants from dramatic spikes that displace families. Limiting rent hikes also prevents landlords from excessively raising rents on vacant units between tenants. Keeping a lid on rent growth ensures housing remains affordable especially in cities with limited vacancies.

Inclusionary Zoning

Inclusionary zoning mandates that new developments include a percentage of income-restricted affordable units. This integrated approach prevents concentrations of poverty and provides affordable housing across neighborhoods regardless of income. Mixed-income development also stabilizes property values and encourages diverse communities.

Community Land Trusts

Nonprofit community land trusts acquire and hold land in perpetuity to preserve long-term affordability. Homebuyers lease the land through a ground lease and own the physical building. Upon resale, the trust retains ownership of the land and is able to cap subsequent sales prices. This reduces market speculation and keeps units affordable.

Expanding Housing Subsidies

Boosting funding for federal housing vouchers and tax credits allows more low-income individuals to access affordable rentals. Currently only 1 in 4 households eligible for housing subsidies receive them. More project-based Section 8 developments, especially in areas with high rents, are needed. Subsidies are key for the lowest earners to afford any housing.

Reforming Zoning and Permitting

Streamlining dense or multi-family projects through zoning reform and accelerated permitting will incentivize affordable development. Removing restrictive zoning codes and lengthy development timelines reduces costs for builders. Regional coordination rather than piecemeal local approvals allow for more large-scale affordable projects.

Training Construction Workers

Apprenticeship programs, career and technical education, and community college certifications can build the skilled trades workforce. Funding initiatives targeted at diverse participants will reduce labor shortages. A robust construction labor pool keeps worker costs reasonable while expanding housing supply.

Conclusions

With coordinated action across all levels of government, business, and the nonprofit sector, the nation’s affordable housing crisis can be curtailed. Building more low-cost units, unlocking exclusionary neighborhoods, discouraging speculation, capping costs, and subsidizing renters are all necessary solutions. While the housing market will remain challenging, targeted policies tailored to local conditions can restore options for underserved communities nationwide.