Challenges in Housing Affordability

Experts point to several factors beyond high mortgage rates contributing to housing affordability challenges for many Americans.

Income and Housing Cost Disparity: While the typical household income has increased to about $81,000 a year in 2024 from $66,000 in 2020, wages have not kept pace with rising housing costs. A household now needs to earn approximately $106,500 a year to afford the typical home, nearly double the income required in January 2020.

Supply Constraints: Tight supply of available homes on the market is another key factor driving housing unaffordability. A decline in new housing units being built, coupled with restrictive land-use and zoning regulations, has led to elevated real estate prices and shortages in some local markets.

Addressing the Issue: To improve housing affordability, experts suggest increasing housing supply by easing land-use and zoning regulations. Local policymakers could lower barriers for builders, allowing for the construction of more homes, including affordable housing options.

Local Impact: Relaxing zoning rules in some areas has already led to an increase in new housing inventory, particularly in markets that permit smaller, attached homes. However, zoning regulations are typically decided at a local level, requiring local policymakers to take action to expand housing supply.

Federal Initiatives: While local zoning rules are not federally regulated, the administration is exploring financial incentives to encourage local areas to be more flexible in their zoning regulations. This could help developers build more affordable housing to accommodate the growing population and demand for housing.