Harvard Study Shows U.S. Housing Production is Lagging Far Behind Demand

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Despite a solid economy, rising wages and household growth that is now back from post-recession lows, new home construction remains depressed, due to supply-side challenges that are making it increasingly more difficult to build at affordable price points. Meanwhile, cost-burden rates for modest-income renter households continue to rise and the issue of rental affordability is increasingly getting attention at the state and local level.

These are among the key findings of the 2019 State of the Nation’s Housing report from the Harvard Joint Center for Housing Studies released on June 25.

NAHB continues to work with the administration and Congress to address America’s housing affordability crisis. The Harvard report reiterates the challenges facing builders to produce homes that are affordable and meet the needs of increasingly diverse households.

In a press release accompanying the report, Chris Herbert, managing director of the Joint Center for Housing Studies, said the most significant factors contributing to the slow construction recovery are rising land prices and regulatory constraints on development.

“These constraints, largely imposed at the local level, raise costs and limit the number of homes that can be built in places where demand is highest,” he said. “The limited supply of smaller, more affordable homes in the face of rising demand suggests that the rising land costs and the difficult development environment make it unprofitable to build for the middle market.”

The report also finds:

  • Affordability conditions vary widely across the nation, with the West Coast generally much less affordable than metro areas in the Midwest and South.
  • Rents are rising at twice the rate of overall inflation.
  • The market continues to lose lower-cost rental units, with the number of units renting for under $800 down by 1 million in 2017.

Addressing growing affordability challenges will require the public and private sector to work together, the study noted.

“To ensure that the market can produce homes that meet the diverse needs of the growing U.S. population, the public, private, and nonprofit sectors must address constraints on the development process,” said Herbert. “And for the millions of families and individuals who struggle to find housing that fits their budget, public efforts will be necessary to close the gap between what they can afford and the cost of producing decent housing.”

View the Harvard report.

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  1. Tammy Braxton says:

    It’s all due to environmental regulation pertaining to land development… If we stay on course the environmental fees and general costs are going to account for 50% of a typical lot in the next decade. Some unifying figure needs to combat all of the local bureaucrats that have no idea what they’re doing and have very little background or experience, but yet dictate every single move of developers. Fire them all and let people build again. What a shame… Heck over half of the regulations developers are forced to follow and the fees they are forced to pay don’t even do a single thing to help the environment, it’s just wacky environmentalists trying to keep and get a bigger salary. Fire them all…

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