Research Reveals That America Needs 300,000 Affordable Homes to Address Housing Crisis

Rising property prices and rent have left middle-income home buyers in the United States struggling with a housing shortage, according to an analysis by the National Association of Realtors (NAR) and Realtor.com. The research uncovers a dire need for over 300,000 affordable homes for buyers falling into the middle-income bracket.

Middle-income defined

The report defines middle-income home buyers as individuals in households earning up to $75,000 annually, which is the median household income in the United States. With this income, buyers can afford homes valued at up to $256,000 without experiencing excessive housing costs. But the current housing market paints a starkly different picture for these aspiring homeowners. Lawrence Yun, chief economist for the National Association of Realtors, sheds light on the factors contributing to the affordable housing crisis, citing a lack of home building as a significant driver. Yun emphasizes a chronic underproduction trend, estimating a 5 to 6 million housing unit deficit from 2010 to 2020. This deficit is exacerbated by the growing population, leading to a surge in rent prices over the past two years. Roanoke City, in particular, faces a shortfall of more than 4,000 housing units, prompting discussions about proposed changes to zoning ordinances, per WDBJ7.

Five years ago, middle-income buyers could afford to purchase half of all available homes, but the latest analysis reveals a sharp decline with these buyers now able to afford less than a quarter of the current listings on the market.

Hurdles for wealth-building

Nadia Evangelou, NAR senior economist and director of real estate research, emphasizes the impact of wealth building through homeownership, stating, "Middle-income buyers face the largest shortage of homes among all income groups, making it even harder for them to build wealth through homeownership."

As of April 2023, approximately 1.1 million homes were available for sale, marking a 5% increase from the previous year. However, only a fraction of these homes are accessible to middle-income buyers, further exacerbating the housing shortage crisis. In a balanced market, where affordability aligns with income distribution, households earning $75,000 or less should be able to afford 51% of the available homes, but the reality is far from it.

Addressing the root cause

Evangelou stresses the need for a comprehensive solution, stating, "Even with the current level of listings, the housing affordability and shortage issues wouldn’t be so severe if there were enough homes for all price ranges." The report suggests that the United States must add at least two affordable homes for middle-income buyers (priced up to $265,000) for every home listed for upper-income buyers (priced above $680,000).

Among the 100 largest metro areas in the United States, certain regions exhibit a more favorable environment for middle-income home buyers. In Youngstown, buyers earning $75,000 can afford to purchase 72% of the listings, showcasing a more balanced market compared to the national average.

On the contrary, as reported by CNN Business, cities like El Paso, Texas; Boise, Idaho; and Spokane, Washington face a significant scarcity of affordable homes for middle-income buyers. In Boise, buyers earning $75,000 can only afford 2% of home listings, highlighting a stark contrast to a balanced market scenario where they should be able to afford over 50% of the listings. Danielle Hale, Realtor.com’s chief economist underscores the economic impact, stating, "Ongoing high housing costs and the scarcity of available homes continue to present budget challenges for many prospective buyers." She suggests that overcoming affordability constraints may lead buyers toward newly constructed homes or suburban options, offering more realistic opportunities for homeownership.

Tony Bertoldi, Co-President of Crea LLC, an affordable housing investment company, emphasizes the impact of the supply-demand imbalance, noting that many individuals are being priced out of the market due to the low housing supply and increasing demand. Bertoldi underscores the inability of those earning minimum wage or in the early stages of their careers to afford market-rate apartments in the current housing landscape.