America’s Housing Shortage Is Not Going Anywhere

The lack of housing, and homes in particular, may have an impact on November's presidential election.

During a March Senate Banking Committee hearing, Federal Reserve Chair Jerome Powell made it clear that America’s housing shortage was a major concern, telling lawmakers he believes the shortage will persist because of factors affecting the construction of properties.

As Fast Company reported, Powell was asked by Georgia Sen. Raphael Warnock what he believed could be driving the prices of homes up, and Powell told Warnock that the challenges of inflation and the pandemic have helped to stagnate the market.

“The housing market is in a very challenging situation right now. You have this longer-run housing shortage, but at the same time, you have a bunch of things that have to do with the pandemic and inflation and [the Fed’s] response with higher rates.” Powell said. “You have a shortage of homes available for sale because many people are living in homes with a very low mortgage rate and can’t afford to refinance, so they’re not moving, which means the supply of regular existing homes that are for sale is historically low and a very low transaction rate. That [all] actually pushes up the prices of other existing homes and also of new homes because there’s just not enough supply.”

This has created what Nicole Friedman, the Wall Street Journal’s housing reporter, described to Vox’s Noel King during a March episode of Vox’s Today Explained podcast as a standoff.

“Well, every boomer would tell you that they bought it for seven raspberries, but at a 15 percent mortgage rate,” Friedman said. “I don’t think that boomers are the problem here. It is a change from past generations that the baby boomer generation is aging in place more than past generations, and they are often working longer.”

Friedman also agreed with Powell’s point about there not being enough houses and provided context as to why that is the case.

“Everybody basically agrees there are not enough homes, because after the financial crisis, a lot of homebuilders went out of business. The ones who were left in business were really, really financially scarred by the crisis.” Friedman said. “They were left with a lot of homes they couldn’t sell and a lot of land they couldn’t sell. So builders became a lot more cautious, and the number of homes being built fell to a much lower level. It’s taken more than a decade for homebuilding activity to really catch back up.”

The lack of housing and homes in particular, is also an issue that is having an impact on the upcoming election in November. As Vox reported in May 2023, the Biden administration announced its Housing Supply Action Plan, which the administration called “the most comprehensive all of government effort to close the housing supply shortfall in history.”

Nearly a year later, there hasn’t been much progress, and higher interest rates have helped to slow the construction of homes. Despite investing in infrastructure and climate change, the federal government did not invest in spending on expanding the housing supply. The zoning issues that the Biden administration raised in its Housing Supply Action Plan was a good first step, according to Andy Winkler, the housing director at the Bipartisan Policy Center.

Winkler’s organization outlined a series of initiatives that it believes the federal government should pursue to achieve notable progress on the housing crisis currently facing America. As Vox reported, advocates for change in the housing system believe it is going to take a big swing from the federal government.

This is reflected in the Bipartisan Policy Center’s conclusion, which reads in part:

“We also believe that both political parties should work together, building on the Biden Administration’s ‘House America’ initiative, to prevent and end homelessness nationwide, a long-time, bipartisan objective. Many of the provisions in this plan will further that goal—by addressing housing supply constraints, providing new assistance to families and veterans, preventing evictions, and more—but it is likely that additional resources and policy changes will be needed to make homelessness in the United States a rare, brief, and one-time occurrence.”