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Exploring the Relationship Between Income and Housing Availability in The United States

A decade ago, the housing shortage remained primarily an issue for democratic coastal states, but today the issue has rapidly spread across the United States. According to The New York Times, housing shortages threaten “the quality of life of Americans, the health of the nation's economy, and the politics of housing construction.” The next generation of home-buyers may not be able to secure housing or even afford it. This raises the question: Why is the housing shortage now a national crisis?

The United States’ Housing Issue

According to Freddie Mac, also known as The Federal Home Loan Mortgage Corporation, the United States is short nearly 4 million housing units to keep up with housing formation. Up For Growth, a housing-focused research group, says that the housing deficit has worsened in 47 states between 2012 and 2019. 

The housing issue has only become more complicated due to the pandemic: home prices and rent skyrocketed, making adequate and accessible housing a luxury. The significant price increase primarily comes from Americans who began looking for larger living spaces to accommodate their remote work. With entire families stuck at home, more space and easy access to quiet outdoor locations became most desirable. So, as thousands of families moved from urban to suburban areas to buy these types of homes, communities that once had housing surpluses began to experience housing shortages and unaffordable living prices. 

Cities that were already experiencing housing shortages suffered from the pandemic the most. Boise, Idaho, already had a deficit of more than 13,000 housing units before the pandemic hit. Los Angeles entered the pandemic in need of 400,000 homes. Even cities with room to build houses, like Phoenix, Arizona, had a deficit of about 100,000 homes in 2019. This data does not mean that there are 100,000 individuals experiencing homelessness in Phoenix, Arizona, though. Instead, these numbers account for families doubling up in homes, young adults who are ready to move out from their parents’ homes, and roommates who live together to cut living costs. 

If Los Angeles did build 400,000 more homes within the last decade, housing prices would be more affordable in the city today. However, low prices would have lured more people into the city, eventually resulting in a demand for more housing. 

In our pandemic-ridden nation, fixing this issue will take years. Rising interest rates and fear of a recession are causing home builders to pull back. Additionally, supply chain delays are causing home construction to take much longer than normal. These factors make creating accessible housing an unappealing job. 

Declining Income 

Income inequality remains a major factor affecting the nation’s housing market. Higher-income households compete for limited housing, giving builders more incentive to construct high-end homes. The average home price will continue to increase through the creation of more high-end homes, making housing inaccessible to the general population. 

According to Business Insider, the median price for home ownership in the United States was  just under $400,000 in February 2022. During that month, home prices grew at an annual pace of 12.9%. Experts suggest that these numbers will rise in the coming months. So buying a home is practically impossible for those earning around or less than the nation’s median household income. 

The bottom line is that incomes are experiencing minimal change while home prices soar to new highs. In 2020, the most recent year with the U.S. Census data available, the median household income was about $67,500. In 2019, this number was about $69,500. This decrease is likely attributed to the start of the pandemic, but nonetheless continues to be a major issue. Today, a household earning $75,000 to less than $100,000 annually can only afford 51% of homes on the market. In 2019, households making that much money could afford 58% of homes on the market. This means that during the pandemic, affordability for households in this income bracket fell by 7%. 

Those most likely to pursue homeownership- married couples with kids- suffered from an increased poverty rate during the pandemic. While their incomes fell, home prices rose, making purchasing a home merely a dream. 

Additionally, it remains recommended that homebuyers spend no more than 30% of their income on housing costs. However, with the significant gap in the income to home price ratio, doing so has become impossible for many. Business Insider says, “at today’s 30-year fixed rate, the buyer of a median-priced home is spending $278 per month more than a year ago on their mortgage payment, which adds more than $3,300 to the yearly financial burden.” With rent prices rising as well, there appears to be no affordable housing option for many. 

The rise in home prices and decrease in median household income is a significant issue for much of the nation’s population. The next generation of home buyers will face adversity to make difficult financial decisions or enter living situations that are not ideal. Additionally, housing shortages across the nation will add even more complexity to this situation. But with fears of a recession and a world recovering from the pandemic, it is unlikely that anyone can fix this housing issue soon. 

Sources:

https://www.nytimes.com/2022/07/14/upshot/housing-shortage-us.html

https://www.census.gov/library/publications/2021/demo/p60-273.html#:~:text=Median%20household%20income%20was%20%2467%2C521,median%20household%20income%20since%202011.

https://www.businessinsider.com/price-average-home-for-sale-us-higher-than-most-afford-2022-3

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