One would be hard-pressed to find anyone in the housing industry who disagrees that affordability remains the biggest challenge in the U.S. today. Yet affordability doesn’t tell the whole story – a deeper dive is necessary to explain the issues plaguing our housing market now. Here are three underreported housing stories that deserve more attention.

Broken Subsidized Housing Delivery

One of the persistent issues throughout the U.S. is the massive need for subsidized housing. This is true in rural and urban areas throughout the country. But sometimes the problem isn’t the supply of subsidized housing, but the red tape involved in getting families who need affordable housing into the available homes.

One example is the city of Portland, Oregon. According to a recent report in Tidings Daily, 7.4 percent of the city’s subsidized housing units (1,863 units) are vacant. In a city with 16,000 homeless people, the fact that nearly 2,000 housing units are vacant, even with a massive homeless population, highlights the challenges in delivering subsidized housing.

In Portland, administrative red tape and the narrowing gap between market-priced units and subsidized rental prices are the primary drivers of increased vacant stock, leaving subsidized units out of reach for many low-income earners.   

Fixing the administrative problems and addressing affordability in more creative ways could enable more families to find safe, affordable housing.

Rising Affordability Issues in Rural Areas

Urban housing problems are often studied by policymakers, NGOs, and housing advocates, but there’s a looming affordability challenge in rural America. In fact, rural America has seen affordable housing erode faster, with the income needed to afford a median home rising 105.8 percent since before the pandemic.

According to Redfin’s The Title Report, homebuyers in rural areas need to earn an annual income of nearly $74,000 to afford a home. In suburban counties, the income required to afford a home has risen from $53,482 to $102,120, but that represents a smaller percentage increase (90.9 percent) than in urban areas.

While governments in some states, including New York, are actively seeking to combat the rural housing shortage through building, most areas lack jobs with incomes to support even modest traditional homes, making manufactured housing more critical than ever.

Manufactured housing and smaller homes can help rural areas, but energy efficiency should be a top priority to ensure these options remain affordable in the long term for residents.

Somewhere Between Fantasy and Reality: Relief

Earlier this month, the National Association of Realtors analyzed what it would take to restore home affordability to 2019 levels, when the typical mortgage payment was just 21 percent of the median household income compared to 30 percent today. That analysis concluded that:

• Mortgage rates would need to fall to 2.65%, down from about 6.15% currently.
• Incomes would need to increase 56% to a median of $132,171, up from 84,763 then, or
• Home prices would need to decrease 35% to a median of $273,000, down from $418,000 last year.

None of that is likely to happen, but the numbers underscore the massive challenge of restoring affordability in the U.S. housing market to match conditions of the pre-pandemic era. What’s surprising is that these figures aren’t more broadly reported, especially since they underscore the steep rise in home costs we’ve seen in six years.

The good news is that economists say that the U.S. will experience improvements in affordability this year, driven by a projected 3.6 percent increase in household incomes, while home prices will grow by 2.2 percent. Those two factors will mean a modest improvement in affordability, something you don’t hear much about among the gloom of the housing reports.

Conclusion

While the U.S. housing market is complex and affordability remains a considerable challenge, many of our issues are not insurmountable. Streamlining red tape, addressing the housing needs of the most vulnerable, and modest increases in incomes and smaller price appreciation will help a housing market that continues to price many people out.