The U.S. Needs 5.5 Million More Units to Close Housing Gap

With the release of a new report that found the housing market needs 5.5 million more units, the National Association of Realtors (NAR) is calling on lawmakers to green-light housing investments in an infrastructure package. Home builders constructed 1.225 million new housing units on average per year during the last 19 years, but from 1968 to 2000, 1.5 million units were built annually, according to NAR’s recent report. The slowdown of home building resulted in the current 5.5 million unit deficit. Further breaking down the deficit, the U.S. housing markets needs 2 million single-family homes, 1.1 million units in buildings with two to four units, and 2.4 million units in buildings with at least five units, reports the Wall Street Journal.

“The scale of the problem is so large,” said David Bank, senior vice president of Rosen Consulting Group and one of the report’s authors. “We need affordable [housing], we need market-rate, we need single-family, we need multifamily.”

The report also says that from 2010 to 2020, new-home construction fell 6.8 million units short of what was needed to meet household-formation growth and replace units that were aging or destroyed by natural disasters.

Limited supply has been a recent driver of rising housing prices for renters and home buyers, alongside robust demand. The median existing-home price rose 19% from a year earlier to $341,600 in April, a record high, according to NAR.

The supply shortage became especially acute in the past year. Builders slowed construction in some regions last spring and delayed land purchases because of the Covid-19 pandemic. In addition, low mortgage-interest rates and an increase in remote work led to a surge in demand for single-family housing. And many homeowners delayed or canceled plans to list their homes for sale.

The number of existing homes on the market fell to 1.03 million units at the end of January, a record low in data going back to 1982, according to NAR. The existing-home inventory totaled 1.16 million units at the end of April, a 20.5% decline from a year earlier.

Housing economists differ in their estimates of the supply-demand balance. In a study earlier this year, mortgage-finance company Freddie Mac estimated that the national deficit of single-family homes stood at 3.8 million units at the end of 2020.