The American housing situation is better today than it was three decades ago, and yet more than 38 million U.S. households have housing cost burdens, leaving little income left to pay for food, healthcare, and other basic necessities.
That's the assessment of Harvard University's Joint Center for Housing Studies (JCHS) in its annual State of the Nation's Housing report. Since 1988, when the report debuted, about 40 million homes have been built to accommodate 27 million new households. Houses have become larger, better built, and generally safer to live in, structurally, JCHS reported.
But fewer young adults, millennials, in this case, can afford homes today than 30 years ago. That, the report states, is despite the fact that high housing costs in the 1980s kept buyers away in droves.
“With fewer young adults buying homes, demand for rental housing remained high—as did rents despite a boom in multifamily construction,” the report states. “Rapid losses of low-cost rentals forced millions more lower-income households to spend outsized shares of their incomes on housing.”
In other words, 38 million households, in the U.S. in 2018, mainly renters, are considered burdened, meaning the residents spend more than 30 percent of their income on household expenses like rent.
“Despite their growing numbers, only about one in four very low-income renters benefited from subsidies to close the gap between market rents and what they could afford to pay,” the report states. As it is, federal housing assistance reaches only a fraction of the large and growing number of low-income households in need.”
The report goes on to say that between the shortage of subsidized housing and the ongoing losses of low-cost rentals through market forces, low-income households have increasingly few housing options. Meanwhile, the rising incidence and intensity of natural disasters pose new threats to the housing stocks of entire communities.
“Soaring housing costs are largely to blame, with the national median rent rising 20 percent faster than overall inflation in 1990–2016 and the median home price 41 percent faster,” JCHS reported.
And although better housing quality accounts for some of this increase, the report stated, “sharply higher” costs for building materials and labor, along with limited productivity gains in the homebuilding industry have made housing construction considerably more expensive.
“Land prices have also skyrocketed as population growth in metro areas has intensified demand for well-located sites,” the report stated. Add to that the rise of new regulatory barriers that limit the supply of land available for homes and the growing complexity of planning and building housing communities, and the strain on the lowest earning young adults, JCHS wrote, is overwhelming.
And it doesn't look like it's going to get much easier. As the expense and complexity of housing has increased, earnings have not necessarily kept pace. Gross domestic product per capita increased 52 percent in between 1988 and 2017, the report stated. And “if incomes had kept pace more broadly with the economy’s growth over the past 30 years, they would have easily matched the rise in housing costs.”
This, JCHS concluded, underscores how income inequality “has helped to fuel today’s housing affordability challenges.”
The study garnered an immediate reaction from housing insiders. Danielle Hale, Chief Economist for realtor.com, said the racial gaps present in the housing system are a top priority to address.
“If we can't address racial and ethnic gaps in the homeownership rate, it may hold back the homeownership rate for the diverse millennial generation,” she said. “The gains made by Asian Americans and Hispanics are important because they make up 27 percent of the 18-34 population.”
At the same time, Hale said the losses in homeownership rate among the African-Americans population “will have a bigger impact on overall numbers as their share of the population grows.” African-Americans currently make up 14 percent of 18- to 34-year-olds, and 10 percent of adults age 55 plus.