3.8 Million Homes Needed to Close the Affordable Housing Gapadmin
A recent Freddie Mac study on the U.S. housing supply found that approximately 3.8 million additional homes are needed in order to close the affordable housing gap.
The ongoing housing shortage is large and rising, due in part to the effects of the pandemic, as well as the high demand for homes coming from eager buyers rapidly entering into the purchasing market.
Even before the COVID-19 pandemic and current recession, the housing market was facing a substantial supply shortage. In 2018, it was estimated that there was a housing supply shortage of approximately 2.5 million units, meaning that the U.S. economy was about 2.5 million units below what was needed to match long-term demand. Using the same methodology, it was estimated that the housing shortage increased to 3.8 million units by the beginning of 2021.
The main driver of the housing shortfall has been the long-term decline in the construction of single-family homes as builders struggle to meet exploding demand. In 2020, it was estimated that there were only 65,000 new entry-level homes completed—less than one-fifth of the entry-level homes constructed per year in the late 1970s and early 1980s.
“The U.S. is currently experiencing an increase in housing demand that is well beyond what record low mortgage rates would typically yield as many people are spending more time at home. This high demand has driven the housing supply shortage even higher and has caused home prices to rise over 12% from a year ago.” Freddie Mac experts do not expect housing demand to decrease any time soon.