U.S. Housing Market Faces 3.8 Million Home Shortage – Builders Struggle to Catch Up

The U.S. housing market remains severely undersupplied, with a shortage of 3.8 million homes in 2024, according to a new report from Realtor.com. Despite an increase in home construction, experts estimate it could take over seven years to close the gap, keeping pressure on home prices and affordability.

Home Construction Still Lagging Behind Demand

For the first time since 2016, home construction has outpaced the formation of new households, signaling progress in addressing the housing crisis. However, at the current pace, it would take at least 7.5 years for builders to meet demand, say Realtor.com economists Hannah Jones and Danielle Hale.

“We're still years away from a normal, healthy housing situation,” said Robert Frick, corporate economist at Navy Federal Credit Union.

Zoning Laws a Major Roadblock for New Housing

One of the biggest barriers to solving the housing crisis is restrictive zoning laws. After the 2008 financial crisis, home construction slowed dramatically. Now that demand has surged again, local regulations are limiting the development of affordable housing.

Single-family zoning, which covers about 75% of U.S. residential land, often prevents the construction of multi-family homes, duplexes, or accessory dwelling units (ADUs). Some economists argue that revising these rules could boost affordable housing options by allowing for smaller, more diverse types of housing.

Proposals include permitting duplexes, fourplexes, or backyard cottages on single-family lots. While some cities and states have begun rolling back restrictive zoning, the impact on affordability remains a topic of debate.

Will Zoning Reforms Solve the Housing Crisis?

Not all experts believe zoning reforms alone will significantly increase affordable housing. A study by the Boston-based Pioneer Institute found that while zoning changes in Massachusetts led to some new affordable units, the overall impact was limited.

“Except in Boston and Cambridge, most of these policies have produced a paltry amount of affordable housing,” said Andrew Mikula, a Pioneer Institute researcher. “It’s extremely difficult to find a scalable way to align the math behind real estate development with programmatic mandates for affordable housing.”

Housing Shortage Likely to Persist for Years

Despite recent efforts to ramp up construction, the U.S. housing market is still far from balancing supply and demand. With high home prices and limited inventory, affordability remains a major challenge for buyers. Without significant changes in construction trends and zoning policies, the shortage could continue for years to come.

Also Read: New Real Estate Commission Rules Have Little Impact on Costs