America doesn’t have housing shortage after all, says new study

Think America's housing affordability problems ultimately stem from a lack of supply? An eye-opening new analysis claims otherwise.

The University of Kansas and The New School have released a new study that pulled 20 years' worth of census data to demonstrate that there is not actually a housing shortage.

Instead, they say the true crux of the crisis lies in the disconnect between incomes and housing costs.

"Affordability challenges stem more from the collision of low incomes with high housing prices, rather than from any absolute shortage of homes," explained lead author Kirk McClure, a professor emeritus at the University of Kansas.

"The implication is that we can't simply construct our way to affordability."

Researchers question the supply shortage narrative

The researchers wanted to answer a simple question: did population growth outstrip new home construction over the past 20 years?

They compared the number of new households to the number of housing units built across nearly 1,000 U.S. cities and towns from 2000 to 2020. A higher rate would indicate a shortage.

Much to the team's surprise, only a small fraction of the communities studied saw demand eclipse supply.

Looking at the country as a whole, builders added 3.3 million more housing units than the number of new households over the span of 20 years—the exact opposite of a shortage.

The outlier is the period between 2010 and 2020 when household growth exceeded the number of homes available. However, this shortage was offset by the large surplus of housing produced in the previous decade.

Over the full 20-year period from 2000 to 2020, there was a net surplus of housing.

The real shortage is income growth

Researchers say the real shortage stems from a lack of affordable homes for lower-income Americans.

The data showed almost every metro area didn't have enough rentals within reach for families earning less than 60% of the local middle-class income—which is about what it takes to qualify for housing aid.

For the poorest renters making less than 30% of that middle-class benchmark, the pickings were even slimmer. Only two cities in the whole country had enough affordable homes.

The study's authors note that the average nationwide rent increased by 13% after accounting for inflation between 2000 and 2020. During the same period, the average renter's income decreased by 1%.

Although there were 14 million housing units available by the end of 2020, the national vacancy rate remained persistently high at nearly 10%. This implies that many of those vacant homes were simply too expensive for most renters.

The researchers contend that expanding targeted government rental assistance would be a more efficient fix than indiscriminate efforts to juice supply in hopes of driving down costs.

They caution against the current White House push to close the perceived housing shortfall.

"Increasing the stock in the hope that prices eventually moderate won't cut it. We need to tackle the underlying disconnect between incomes and housing costs head-on to open up access to the existing supply," McClure said