According to a recent report from Harvard University’s Joint Center for Housing Studies, home building has barely kept pace with the new number of household formations over the past eight years. This study additionally pointed to the fact that the types of housing that are being built are “the wrong types of houses for people wanting and needing to buy houses.”
Home building essentially bottomed out in 2011 when just 633,000 new homes were built. In 2018, the home building situation improved as 1.2M new homes were built. HOWEVER, and this is a big HOWEVER, one would have to go back to the year 2002, before the Great Recession, when fewer than 1.2M homes were built.
The Joint Center’s report stressed that smaller, affordable housing is in particularly short supply due to rising labor/material costs and regulatory restrictions that render smaller, affordable housing less profitable for builders.
A recent study by the Urban Land Institute corroborates the Joint Center’s conclusions. According to the Urban Land Institute, “New ‘attainable’ housing (defined as unsubsidized, for sale, affordable to households with incomes between 80%-120% of median incomes in a given area) has dried up in recent decades and has been replaced by larger, more expensive homes.”
The gap between what is being built and what is needed per household size is HUGE…one-person households have quintupled between 1987-2017 and two-person households have tripled.
Meanwhile, the share of newly built one and two-bedroom homes has been cut nearly in half while the share of newly built homes with four-bedrooms or more has doubled over the last 30 years.
Take a look at the disparity:
Number of Bedrooms
Year 1-2 bedrooms 3 bedrooms 4+ bedrooms
2017 10% 45% 46%
2007 12% 50% 38%
1997 13% 56% 31%
1987 19% 58% 23%
Year 1-2 people 3 people 4+ people
2017 63% 15% 23%
2007 60% 16% 24%
1997 58% 17% 26%
1987 56% 18% 26%