When it comes to examples of housing shortages cities like New York, Washington, and San Francisco usually are the cities that come to mind. However, thanks to the after-effects of the Great Recession housing underproduction has doubled in just seven years and the country is now millions of homes short of meeting consumer demand.
A new report from Up For Growth highlights the one issue causing the current housing crisis; underproduction. According to authors Mike Kingsella and Leah MacArthur the United States is 3.8 million homes short of meeting housing needs, double the number from 2012.
- The housing deficit became more severe in 230 metropolitan areas between 2012 and 2019. Only 25 regions saw their housing deficit shrink.
- Metro areas experiencing underproduction jumped 69% in seven years to 169 in 2019.
Knowing the problem, however, doesn’t necessarily mean we know the solution. The reason for shortages varies by location. For example, in Detroit, underproduction is driven by uninhabitable units, while in Washington DC, underproduction is fueled by a lack of household formation. In some areas, like Sacramento, it’s as simple as just a lack of homes.
- California has the largest deficit of homes at 980,000, while Mississippi is only short by 1,000,
The good news is that there is more housing under construction nationwide today than at any time since the 1970s. Unfortunately, Robert Dietz, chief economist for the National Association of Home Builders, is not sure this going to last. He told the New York Times, “…rising interest rates and fears of a looming recession mean that home builders are already starting to pull back.” I hope builders stay the course knowing that there is an appetite for homes out there. However, many builders are still very cautious after 2008 which could cause them to pull back more than necessary to protect their company from possible exposure to an economic downturn.