The Joint Center for Housing Studies of Harvard University (JCHS) released its new “The State of the Nation’s Housing” report for 2017. The report analyzes the national housing market in terms of housing demand and supply, home prices, and construction volumes.

According to the report, all of these measurement criteria have risen, while the number of distressed homeowners has fallen sharply. However, a coupling of strengthening demand and extremely tight supplies of both for-sale and for-rent homes are increasing housing costs and exacerbating concerns about housing affordability. For 2015, the report states nearly 19 million US households paid more than half of their incomes for housing.

JCHS Managing Director Chris Herbert asserted that the recovery in home prices reflects a pickup in demand, but it is also being driven by a very tight supply of housing. Even after seven continuous years of construction growth, the US added less new housing over the last decade than in any other ten-year period going back to at least the 1970’s.  This is due to a variety of factors. Labor shortages are a key constraint. Furthermore, regulatory and stricter financing requirements have limited the supply of land available for both single- and multifamily housing construction. In conjunction, these constraining forces raise development costs and make it less feasible to build rental units affordable to low and moderate income households. The rebound in single-family construction has been especially weak. Herbert articulated that a stronger housing supply response is needed to keep pace with demand and maintain moderately priced homes.

On average, 45 percent of renters in the nation’s metro areas could afford the monthly payments on a median-priced home in the market area. However, in high-cost metros of the Pacific Coast, Florida, and the Northeast, that figure is under 25 percent. With high-end luxury accounting for most new construction and continuous losses of more affordable housing stock, there is a augmenting mismatch between the rental stock and an increasing demand from low- and moderate-income households.

Looking at the decade ahead, the report claims that as millenials move into their late 20’s and early 30’s, the demand for both rental housing and entry-level homeownership is bound to soar. As a diverse generation, this population will propel demand in a broad range of housing in cities and suburbs. Members of the millennial generation, the largest in U.S. history, formed 7.6 million new households between 2010 and 2015. The baby-boom generation will also continue to play a strong role in housing markets as they drive up investment in existing and new homes to meet their changing needs as they age. By 2035, 50 million households, one out of every three, will be headed by older adults, which will greatly increase the demand for new and modified units that meet the needs of aging adults.

The report asserts that affordability and accessibility are both major concerns:

  • Between 2005 and 2015, the number of rental units costing less than $800 per month declined while the number of units costing over $2,000 per month jumped by 1.5 million.
  • Three quarters of renter households eligible for rental assistance on the basis of their income do not receive it.
  • Although 17 million households include at least one person with an ambulatory disability, only one percent of the nation’s housing stock has five critical accessibility features.

Lastly, the report reveals that segregation by income is increasing, which has long-term damage to the health and well-being of individuals living in these high-poverty neighborhoods:

  • Between 2000 and 2015, the share of the poor population living in high-poverty neighborhoods rose from 43 percent to 54 percent.
  • The number of high-poverty neighborhoods rose from 13,400 to more than 21,300.
  • The recent growth of these neighborhoods has been fastest in low-density areas at the metropolitan fringe and in rural communities, although most high-poverty neighborhoods are still concentrated in high-density urban cores.