Researchers at the University of Southern California (USC) released an in-depth study this week in which they argue that “decades of policy missteps“ have created a shortage of affordable housing across the U.S. and are pushing homeownership out of reach for millions of Americans.
The full study, which was published in the January edition of The Russell Sage Foundation Journal of the Social Sciences, goes back 20 years to examine the origins of the current housing crisis. The analysis also comes at a time when multiple wildfires are devastating portions of the Los Angeles area. CBS News reported Wednesday that at least 25 people have been killed, with more than 12,000 structures lost and 88,000 residents still under evacuation orders.
USC researchers said that the national housing shortage — which ranges up to 7 million units, according to some estimates — is only expected to deepen in the coming years due to the effects of climate change and the frequency and intensity of natural disasters such as hurricanes and wildfires.
“A tightly constrained housing supply reduces resilience to absorb losses from unexpected disasters — fires, earthquakes, hurricanes and more. In Los Angeles, this lack of flexibility could rapidly intensify gentrification as relocations strain the existing housing stock,” according to Dowell Myers, a USC professors and the lead author of the study.
The study claims that the crisis can be traced back to the early 2000s when subprime lending activities were prevalent. The resulting housing market crash and the Great Recession led policymakers to overcorrect by “tightening mortgage lending standards and limiting funds for new construction.“ In turn, millennials, who were just starting to enter the housing market, were faced with fewer choices as homebuilding activity fell to its lowest level in 60 years.
Data from the Urban Institute shows that mortgage credit availability as of second-quarter 2024 remains far below what is judged to be “reasonable lending standards“ from 2001 to 2003.
The policy missteps that are mentioned in the study include “severe underestimations of millennial demand“ that didn’t become evident until many years later “when pent-up demand surged.“ Policymakers also failed to account for how past policies and population trends impact current homeownership rates; utilized “flawed demand measurements“ that did not identify households that cannot form due to housing shortages; and misinterpreted the post-housing crash decline in homeownership to a “permanent shift“ in consumer preferences.
The study notes that from 1976 to 1990, the national birthrate increased by 32%, which eventually led to an influx of young adults moving into cities by 2010. The Great Recession “delayed their entry into stable jobs and housing,“ and by the time they emerged from the recession to buy homes, “supply was scarce.“ Homebuilders and local officials mistakenly assume that millennials would stay in apartments and have roommates for longer, but instead their demand to own a home skyrocketed.
USC researchers offered two key solutions to address the growing inventory shortage. The first is to shorten the lag time for creating new homes by anticipating demand over the next five years. The second is to combine the tracking of population growth and housing supply rather than isolating them.
“Housing policy needs to be better at planning for the needs of different age groups and their life stages to avoid mismatches between supply and demand,” Myers said. “Without proactive policy, we risk not only falling short of meeting demand but also being unprepared with a resilient housing supply that can accommodate victims of climate-driven disasters, like wildfires, or other emergencies that create new demand in an instant.”
