Affordability issues for homeowners and renters are creating an economic crisis that is not being easily solved with new construction, according to “The State of the Nation’s Housing 2024” report published by the Joint Center for Housing Studies of Harvard University.
The report cited new record highs for home prices during early 2024, with a home price index that is now 47% higher than pre-pandemic early 2020. In the rental market, rent growth slowed to 0.2% year-over-year in early 2024, but rents were also up 26% since early 2020 and were rising in three out of every five markets.
“In the face of rising housing costs, burden rates are also increasing,” warned Chris Herbert, managing director at the Joint Center for Housing Studies. “Half of all renter households—22.4 million in total—spent more than 30% of their income on housing and utilities at last measure in 2022, up 2 million since 2019 and the highest number on record. Rents have been rising faster than incomes for decades. However, the pandemic-era rent surge produced an unprecedented affordability crisis that continues.”
Herbert added that the “number of cost-burdened homeowners also grew by 3 million to 19.7 million between 2019 and 2022, with most of the increase among households with incomes under $30,000. Nearly one in four (23.2%) homeowner households are now stretched worryingly thin, including 27.4% of homeowners age 65 and over. Adding to the financial pressures, insurance premiums grew an average of 21% between May 2022 and May 2023, and property taxes are on the rise, further increasing the cost of homeownership.”
The report observed that multifamily completions rose by 22% last year, which helped to slightly cool the rental market. However, property owners are dealing with her operating costs – most notably a 27.7% average increase in owners’ insurance premiums. On the homebuying front, there has been a growing number of new homes being built, but these also come with significant price tags.
“Construction of smaller, lower-cost, entry-level housing is still hampered,” Herbert continued. “Restrictive zoning and regulatory policies, skilled labor shortages, financing limitations, and other challenges increase the costs and reduce the amount of affordable development.”
The Harvard report also noted that homelessness reached a record-high 653,100 people in 2023, a situation exacerbated by the influx of illegal immigrants, and it pointed to the economic impacts of climate-related disasters on housing markets. Herbert stated solutions to these multiple problems need to be addressed sooner rather than later.
“The country’s housing challenges are likely to become more urgent in the years ahead,” Herbert warned. “Addressing these challenges will not be easy, but with concerted efforts by policymakers at all levels of government, together with the private and nonprofit sectors, we have the ability to increase the supply of quality, affordable homes in thriving communities across the U.S.”
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