The Harvard Joint Center for Housing Studies’ (JCHS) 2023 State of the Nation’s Housing report shows that while the growth in home prices and rents has slowed, housing costs are still high and record numbers of renters are severely cost-burdened. One of the key issues highlighted in the report is the shortages in housing.
As JCHS senior research associate Daniel McCue pointed out in a recent blog post, the share of vacant units for sale (0.8%) is the lowest dating back to the 1950s and the vacancy rate for rental units (6.5%) is lower than it’s been since the 1980s.
“With so few units available, options are limited, and competition is making housing much less affordable for everyone, while putting lower-income households at a disadvantage,” McCue stated.
High building costs also continue to exacerbate affordability challenges.
“Even excluding financing and labor costs, inflation in the price of building products has increased the cost of residential construction by 35% in the past three years, nearly four times the rate of increase over the previous three years,” McCue pointed out. “Regulatory barriers and development fees also push up costs.”
To account for higher costs, he added, “new homes are targeted to those who can afford higher prices, and as a result the homes get bigger and more expensive.” Only 1 in 5 new homes is smaller than 1,800 square feet, compared to one-third of homes in the 1990s.
Buyers who can afford these higher price points continue to remain engaged, based on recent data from NAHB.
“Despite lower perceptions of affordability, the share of prospective home buyers who are actively engaged in the purchase process remained essentially unchanged between the first and second quarters of 2023, at 56% and 55%, respectively,” noted Rose Quint, NAHB assistant vice president for survey research, in this Eye on Housing post. “The lack of change in this metric suggests that some buyers are willing to continue trying to find a home despite higher prices and mortgage rates.”
McCue concluded that federal assistance will be necessary to help solve this growing affordability issue.
“Ultimately, it will require a multifaceted, public and private sector approach with investment, advancement, innovation, and collaboration across every aspect of housing production to provide enough housing to meet the needs of millions of low- and moderate-income households who continue to be burdened by high housing costs,” he stated.
The full report is available at jchs.harvard.edu.