Annual Housing Report Details Affordability Crisis, Supply-Side Pressures, More
This year, the State of the Nation’s Housing report from the Joint Center for Housing Studies of Harvard University turns 30. Along with assessing today’s market, the report analyzes how current conditions stack up to the housing market of 1988, and the country’s progress toward “fulfilling the promise of decent, affordable [housing] for all.”
Today’s typical home is larger, and more likely to have amenities like air conditioning or extra bathrooms than the typical home of 1988. The typical home in 2018 is also more expensive, cited as a major reason behind lower young adult homeownership rates today than 30 years ago. Indeed, the median home price grew 41 percent faster than overall inflation from 1990 to 2016, whereas the median income growth for young adults grew 5 percent between 1988 and 2016.
Skyrocketing costs of labor, building materials, and land are all cited as contributing to the rapid rise of housing costs today, as are regulations that restrict the supply of land and increase the risks of development. By the numbers, single-family starts hit 849,000 units in 2017, less than the long-term annual average of 1.1 million, despite increases in each of the past six years. The Joint Center suggests that this reflects builder caution still emanating from the housing crisis.
Unique to the nation’s housing in 2018 is weaker affordability. The real median income of households in the bottom quarter grew 3 percent between 1988 and 2016. On the other hand, gross domestic product per capita increased about 52 percent from 1988 to 2017. Had incomes kept up with economic growth in that time, the report says, there would not be such a mismatch with housing costs, “underscoring how income inequality has helped to fuel today’s housing affordability challenges.”
The median rent payment in the U.S. went up 61 percent between 1960 and 2016, and the median home value rose 112 percent in that time, yet median incomes increased only 5 percent for renters and 50 percent for homeowners.
The state of the nation’s housing is something of a mixed bag, the Joint Center concludes. While household incomes are rising and the economy is near full employment, income growth for low- to moderate-income households have not kept pace with growing housing costs, boosted by rising building costs.
In a call to action, the report claims national efforts to close the affordability gap are necessary, requiring sweeping collaboration between public, private, and nonprofit sectors, and innovation in how homes are designed, built, financed, and regulated. The report emphasized the necessity of a full federal response to today’s affordability crisis, adding, “the federal government’s failure to respond adequately to this large and growing challenge puts millions of households at risk of housing instability, and the threats it poses to basic health and safety.”