Housing affordability has become a crucial issue in the 2024 U.S. presidential election. Both Kamala Harris and Donald Trump have presented plans to tackle the affordable housing crisis. Yet, their strategies differ significantly.
According to a recent Pew Research Center survey, 69% of Americans are “very concerned” about housing costs. This is an increase from 61% in April 2023.
DEFINING AFFORDABLE HOUSING
What defines an “affordable” home? How many Americans struggle to afford housing? This analysis provides insights using data from the U.S. Census Bureau and other reputable sources.
In 2023, 31.3% of American households were considered cost-burdened. This includes 27.1% of households with mortgages and 49.7% of renting households. The American Community Survey (ACS) offers these one-year estimates.
Homeownership vs. Renting
More people own homes than rent. As of the second quarter of 2024, 65.6% of occupied housing units were owner-occupied, while 34.4% were rented, according to the Current Population Survey/Housing Vacancy Survey.
When focusing on renters, we see different statistics. About 51.8% of renting households paid 30% or more of their income on gross rent in 2023. This figure is slightly lower than the 53.4% in 2011.
RECENT CHANGES IN THE HOUSING MARKET
The U.S. housing market saw a significant decline in active listings during the COVID-19 pandemic. But, it has started to recover.
In September 2019, there were over 1.2 million active listings, according to Realtor.com. By September 2023, this number dropped by 42.7%, down to around 702,000. In September 2024, active listings rose to about 941,000, a 34.0% increase from the prior year.
Home Prices Continue to Rise
Home prices continue to climb. The Federal Housing Finance Agency’s national House Price Index increased by 57.8% from July 2019 to July 2024. Meanwhile, the Consumer Price Index rose only 22.8% during the same period.
GEOGRAPHIC VARIATIONS IN HOUSING AFFORDABILITY
“Location, location, location” heavily influences housing costs. Many areas in California report the highest shares of cost-burdened households.
The federal government classifies over 900 metropolitan and micropolitan areas in the U.S. Many of the areas with the highest cost burdens are in California.
State Comparisons
Certain states have alarming rates of households spending over 30% of their income on housing. In California, 40.6% of households meet this threshold, including 54.1% of renters. Hawaii follows with 38.2%, and Florida has 37.2%.
In contrast, states like West Virginia (21.0%) and North Dakota (22.0%) show much lower percentages of cost-burdened households.
IMPACT OF INTEREST RATES
Interest rates significantly affect housing affordability. Approximately 39.3% of households carry mortgages, equating to 51.6 million homes.
After the pandemic began, the average interest rate on a 30-year fixed mortgage dropped from 3.72% in early 2020 to as low as 2.65% by early 2021. Many homeowners refinanced their mortgages during this period.
Current Interest Rates
As of late October 2024, the average 30-year mortgage rate stands at 6.54%. This reflects the fluctuations in investor expectations about inflation.
According to the Federal Housing Finance Agency, this “lock-in” effect has led to 1.33 million fewer home sales between the second quarter of 2022 and the end of 2023.
NEED FOR NEW CONSTRUCTION
Building new homes is essential to alleviate the housing shortage. The housing industry struggled post-Great Recession. From a peak of 2.07 million housing unit starts in 2005, only 554,000 began in 2009.
As of September 2024, housing starts were at a seasonally adjusted annual rate of 1.35 million. This number still falls short of pre-crisis levels.
The decline in entry-level single-family homes is alarming. In 2004, 186,000 homes smaller than 1,400 square feet were built. In 2023, only 87,000 such homes were constructed.
MULTIFAMILY HOUSING SOLUTIONS
Multifamily housing could offer some relief. After the Great Recession, the construction of buildings with five or more units steadily increased. In 2023, 438,300 of these buildings were completed, the highest since 1987.
As of September 2024, completions of such buildings ran at a seasonally adjusted annual rate of 671,000.
