Why America's housing shortage is getting worse, even as construction sees its biggest boom in 16 years

fdemott@insider.com (Filip De Mott)
·2 min read

  • US housing construction is at its strongest point since 2007, with 1.45 million homes added in 2023.

  • But an increasing number of families looking for homes is deepening the US's ongoing home shortage.

  • Five of the most impacted metros are in California, Zillow says. Others include Austin and Seattle.

US housing construction just notched its best year since the global financial crisis, but it hasn't been enough to ease America's home shortage, Zillow reported Tuesday.

According to the real-estate firm, 1.4 million homes were added two years ago, reaching a high not seen since 2007. And while 2023 added another 1.45 million to the inventory, construction will have to accelerate considerably to make an actual dent in the market.

"A large pre-existing deficit suggests that even if the nation were to see no population growth, that increase is still far below what would have been needed to close the deficit," Zillow wrote.

Fueling the stubborn deficit is an overflow of house-hunting families. In 2022, over 8 million groups or individuals were looking to form their own households but only 3.5 million homes were available for rent or sale that year, the report said.

That year, the nation's vacancy rate fell to a multidecade low of 2.5%. An increasing number of families continued to blunt the impact of rising construction in 2023, Zillow said.

But the consequences of a booming population have been felt differently across the country. Regions bringing in the most new residents are undergoing some of the worst shortages in the US.

That includes Austin and Seattle, for instance. Zillow also cited Boston, Sacramento, Portland, San Diego, San Francisco, San Jose, Minneapolis, and Los Angeles as the metros with the deepest lack of homes.

"While the presence of geographic constraints to building plays a role on the coasts, these also happen to be markets with the most strict building regulations in the country," it said.

To unwind these pressures, construction will need policy support, such as zoning reforms that focus on giving more room to single-family units. Other steps include reduced parking requirements, ending permit delays, and supporting housing trust funds.

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