Harvard Housing Study Shows Affordability Hitting Demand for Home Purchases

While supply concerns are still weighing on housing affordability, a combination of soaring prices and economic uncertainty is dragging on housing demand, according to the annual State of Nation’s Housing report from the Harvard Joint Center for Housing Studies (JCHS).

The study noted that the economy added just 116,000 jobs in 2025, the lowest number of new jobs added in a non-recession year since 2002. With consumer sentiment near record lows and interest rates on all loans at generational highs, many young adults are not inclined to form new households, a primary driver of home sales and rentals, instead doubling up or living with family.

But housing supply issues are still a major concern in the market. The JCHS report noted that single-family home starts fell 7% in 2025 as high purchase prices stifled demand and unsold new homes accumulated. Builders responded by cutting prices, buying down interest rates, and pivoting toward smaller homes, townhomes, and smaller lots to reduce costs.

The report also details how federal, state and local officials are quickly moving to address housing supply.

“We’re seeing growing momentum on the part of policymakers to address housing affordability,” said Daniel McCue, JCHS senior research associate, on a conference call discussing the report.

Growing numbers of state and local governments are loosening local zoning and land-use regulations to increase the availability of buildable land.

In 2025, Cambridge, Mass., joined cities such as Cincinnati and Minneapolis in ending single-family only zoning, and Maine followed states such as Washington and Vermont in passing sweeping statewide reforms allowing small multifamily buildings (missing middle housing) on properties zoned for single-family homes.

Building codes also play a big role in hindering supply, according to the report, noting that several states made changes to codes last year, such as allowing single stairwells on small multifamily buildings, that make development easier.

This aligns with a recent trend of states pausing new building code adoption to give builders and officials more time to build to the current code. Connecticut recently passed such a measure after California last year.

Sharon Wilson Géno, president of the National Multifamily Housing Council, noted on the call that many municipalities still have pandemic-era eviction moratoriums in place. This limits developers from spending on new projects and is an issue “that will need to be addressed at the local level.”

In a positive development for the industry, the report notes that remodeling activity is surging. Over the last 10 years, owner home improvement spending grew by 153%, far outpacing growth in spending on new multifamily (84%) and single-family development (90%).