US Housing Market NEEDS 5.5M More Housing Units

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Key Highlights

  • Builders constructed 1.225M new housing units from 2020 – 2021
  • This figure down from annual average of 1.5M new units from 1968 – 2000

NAR Calling for “Once-in-a-Generation” Policy Response to Country’s Housing Shortag

A newly released report from the National Association of REALTORS® (NAR) “encourages” lawmakers to include housing investments in any infrastructure package they are considering.

Why?  Because, according to NAR, the country needs ”an additional 5.5M housing units due to the discrepancy between an annual average of 1.5M new units from 1986 – 2000 and the annual average of 1.225M new housing units build between 2001 – 2020.

NAR is calling for lawmakers to generate a “once-in-a- generation” policy response (with necessary fiscal backing via any infrastructure package to help alleviate the country’s housing shortage.

Composition of 5.5M Housing Deficit

David Bank, senior vice president of Rosen Consulting Group and one of the authors of this most recent NAR report, said, “The scale of this problem is so large…we need affordable (housing), we need market-rate, we need single-family, we need multifamily.

Specific housing types mentioned in this report include

  • 2M single-family homes
  • 1M units in buildings with 2 – 4 units
  • 4M units in buildings with at least 5 units

Supply Shortage Acute

NAR’s annual report on the State of the Nation’s Housing also included the fact that from 2010 – 2020, new home construction dropped -6.8M units short in the face of growing household formation and not replacing units that were aging or destroyed due to natural disasters.

The number of existing homes on the for-sale market dropped to 1.03M units as of the end of January 2021, a record low since 1982, according to NAR. By the end of April 2021, the number of for-sale existing homes totaled 1.16M, an annual decline of -20.5%.

New Home Construction Ramped Up to 1.38M Units in 2020

New homebuilders most definitely responded to strong demand in 2020 by building 1.38M new housing units, the most since 2006

However, challenges continue within the new homebuilding industry such as:

  • Labor shortages
  • Ready-to-build land
  • Cumbersome and delaying zoning restrictions
  • Rising material costs
  • Supply chain delays

In fact, according to the National Association of Home Builders, more than 90% homebuilders have indicated shortages in framed lumber and appliances.

Action Needed & Time Frame to Shrink Housing Deficit

This latest NAR report states that homebuilders would need to exceed the historical average pace of building 1.5M housing units per year

NAR recommends a pace of 2.1M units per year…and even at that pace, NAR indicates it would take a decade to shrink the existing gap of 5.5M housing units.

NAR is calling for lawmakers to craft several policy responses that would include…

  • Converting commercial buildings for residential opportunities
  • Expanding the tax credit program for low-income rental housing
  • Renovation of distressed properties
  • City and state incentives to reduce regulatory limits on housing density.

Also, according to NAR, such proposals would create 2.8M jobs and generate more than $400B in economic activity.

 

Thanks to the National Association of REALTORS® and The Wall Street Journal.

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