In Brief:
It just keeps getting worse. The U.S. housing market is “defined” by unaffordability, according to a new report from the Joint Center for Housing Studies at Harvard University.
The annual report, The State of the Nation’s Housing, compiles reams of data to paint a picture of national and regional housing costs for homeowners and renters. On the whole, it’s bad news for both groups.
“There’s fewer and fewer places around the country where people can go for an affordable house or affordable rent,” says Daniel McCue, a researcher at the center and lead author of the report.
The center has been producing its housing report for decades. Although housing costs were always a concern, the last half decade has accelerated many of the challenges and introduced new ones. In 2024, McCue says, “We’re having less difficulty convincing people that it’s a problem.”
The numbers are indeed grim. Home prices hit an all-time high in the early months of 2024, with prices rising in 97 out of the 100 biggest markets. Home insurance premiums also rose an average of 21 percent last year, while property taxes are increasing and mortgage interest rates remain close to their two-decade peak.
As a result, it’s harder than ever for renters to buy homes. It requires an income of just under $120,000 per household to be able to afford the monthly cost of a typical low-down-payment home loan at current rates. Only 1 in 7 renter households earn that much.
Meanwhile, half of all renters are spending more than 30 percent of their income on rent. A record high of 12.1 million renter households are spending more than half their income on housing. And more people are homeless than ever before: 653,100 individuals were homeless during the annual count on one night in January, an increase of more than 70,000 from the previous count.
The Big Picture
The report is meant to be an overview of how housing market dynamics are changing. “The goal is to get beyond the day-to-day updates,” McCue says. “We try to pull back and say, ‘What’s the bigger-picture story?’” The big-picture story — one of a shortage of affordable housing for all types of people, even those at the higher end of the income scale — has been coming into sharper focus for years.
Recent data shows that housing prices are climbing in almost every community in the country. Rents are rising in 3 out of 5 housing markets. Even in markets where rents aren’t rising as quickly, they’re still more than 20 percent higher than pre-pandemic levels.
Rent prices have also been growing faster than incomes for decades. Homeownership is out of reach for a greater share of renters than ever before. “One thing that has changed is that the discussion of housing affordability has become more widespread,” McCue says. “It’s reaching different areas and more constituencies. Even lower cost metros are seeing surges in house prices.”
High costs don’t affect every community equally. Home prices are growing rapidly in the Northeast and the Midwest, but more slowly in the South and West. Black and Hispanic renters are more likely to be cost-burdened than white and Asian ones. Only 8 percent of Black households and 13 percent of Hispanic renters earn enough money to enter the homebuying market; the rate is 16 percent for white renters and 29 percent for Asians.
“Inequalities abound in the housing market,” McCue says.
Solutions Slow to Take Effect
There is some news that’s more positive. Nearly 450,000 new apartments were finished in 2023, the highest rate in about three decades, according to the report. The influx of new supply coincided with a slowdown in the rate of rent growth. Year-over-year rent increases in early 2024 were just 0.2 percent on average.
But they’re still much higher than before the pandemic. “Rent is high and still rising in a lot of places,” McCue says, “so although we have a big surge in apartments, it’s not translating into lower rents for a majority of the country.”
State and local leaders are spending more of their time making housing policy in recent years. Many, especially in state governments, are working to ease zoning restrictions in hopes that builders will add more supply and bring down the cost of housing. But zoning changes are just “one of many things that need to happen,” McCue says. Expanded assistance could help as well; federal housing choice vouchers, for example, currently only reach about 1 in 4 qualified renters.
Some increasingly common policies, such as allowing accessory dwelling units (ADUs), promise to help add some new supply but aren’t being maximized. ADUs, while cheaper than standalone units, are still difficult to build. “The homeowner has to basically turn themselves into a general contractor,” McCue notes.
Some jurisdictions have provided pre-approved floor plans, low-interest loans and grants to make it easier to build. “Our studies have shown that just making [ADUs] legal is OK — it gives you some [units] — but you have a much better reaction if you provide people the means and some help,” McCue says.
Insurance Issues
A growing driver of housing costs is insurance. Home insurance providers are beginning to adjust their policies and practices in response to the increased risk of extreme weather amid a changing climate and other factors. Premiums are rising, including a 27 percent increase in insurance costs for property owners of multifamily buildings. In certain disaster-prone places, like Florida, premiums are up about 35 percent on average.
Although homeowners have lots of advantages compared to renters — accruing the benefit of the growth in housing costs, for example — many will still be pushed to sell. At some point, they won’t be able to afford incremental growth in things like taxes and insurance, McCue says.
