[User] Historically Low Population Growth Population growth is the primary long-term driver of household growth and remains historically low. Overall, the US population grew by 1.26 million people in 2022, or just 0.38 percent. While this represents a slight uptick from previous years—population growth hit 100-year lows in 2019 and again in both 2020 and 2021—it is nevertheless a meager growth rate when compared with the 2.8 million annual average (0.94 percent) in the 2000s. In fact, if not for the 0.35 percent rate of growth in 2020 and the 0.16 percent growth rate in 2021, the 2022 growth rate would have marked a new 100-year low. Population growth is generated by either “natural” growth—the net of births minus deaths—or immigra tion. Gains from immigration can be fickle because they are subject to unpredictable policy changes and economic cycles in the US as well as other countries. Natural growth, on the other hand, is more predict able because it is driven by slow-moving factors like birth and mortality rates. Until recently, natural growth has been the primary source of population growth in the US. Throughout the 2000s and early 2010s, natural growth gradually slowed from 1.7 million to 1.4 million per year while net gains from immigration fluctuated between and 1.2 million. Then, in the late 2010s, both natural growth and immigration plummeted, with annual gains from immigration ultimately dipping below and natural growth dropping to less than in 2021. Indeed, deaths are projected to outnumber births beginning in 2043, according to the Congressional Budget Office, at which point population growth will rely entirely upon immi gration. Recent estimates suggest we may reach that point much sooner. Population and Household Growth Depending on Immigration While immigration has recently emerged as the primary source of population growth nationwide, it has long been the largest driver in many areas across the country. Growth in immigrant-headed households accounted for more than a third (35 percent) of all household growth between 2002 and 2022, raising the share of households headed by an immigrant from 14 percent in 2002 to 17 percent in 2022. Immigrants make up even higher shares of households in some states, repre senting 33 percent—fully one-third—of households in California, 27 percent in New Jersey, and 21 percent in Texas. Immigrants also headed large shares of house holds in select metro areas, including 48 percent of households in the Miami metro, 40 percent in the Los Notes: Natural population change is the difference between births and deaths. “All negative” means that each component of population change was negative in 2021–2022. Source: JCHS tabulations of US Census Bureau, 2022 Population Estimates Program. Residential Mobility and the Shifting Geography of Housing Demand As the rate of population growth slows, domestic migration will become a more important driver of household growth and housing demand. Already, domestic migration was the largest source of popula tion growth in 20 states and in the majority of counties that experienced growth in 2022. Some of this shift in geography, particularly the increase in moves to smaller metros and rural areas, may be related to the pandemic-fueled rise in remote work. Between 2019 and 2021, the share of the workforce reporting that they usually worked from home tripled from 6 percent to 18 percent. Among younger workers ages 25–34, rates of working from home more than quadrupled from 4 percent to 18 percent. Given that younger adults have the highest mobility rates and that remote workers were more likely than commuters to move, the increase in working from home among younger workers likely contributed greatly to the recent rise in interstate mobility. In 2021, fully 29 percent of householders ages 25–34 who worked from home had moved in the past year, compared with 21 percent of commuters of the same ages. That said, surveys continue to show that, on net, inter state and intercounty mobility rates at best only inched upward in 2022. And, within-county moves—which account for the vast majority of household moves— continued to decline as they have for decades. In all, since 2010 the share of households moving outside their county each year has held at roughly 3.4–3.9 percent, with the interstate component hovering between 1.9 percent and 2.4 percent. Meanwhile, the share of households moving within their county dropped by nearly half, from 8.3 percent in 2010 to 4.8 percent in 2022. This decline in local mobility results in fewer homes available for sale or rent and less spending on pre- and post-move renovations, furnishings, and other services, and has shrunk the overall residential mobility rate. According to Current Population Survey data, the total share of households that reported having moved in the past 12 months— local or otherwise—fell from 11.9 percent in 2010 to 9.8 percent in 2019 and then again to 8.8 percent in 2022. Additionally, new, younger households are helping to make US households more racially and ethnically diverse. As of 2022, while 35 percent of all house holds were headed by a person of color, up from just 25 percent in 2000, people of color accounted for 44 percent of households ages 25–34 and 42 percent of households ages 35–44, as compared with 35 percent of households ages 45–64, and 24 percent of house holds ages 65 and older. People of color accounted for about 85 percent of household growth over the past 10 years, including 42 percent of total household growth from Hispanic households, 18 percent from Black households, and 25 percent from Asian house holds or households of another race. Going forward, people of color are expected to drive the majority of both population and household growth, while the older households lost will primarily be white. According to 2022 Current Population Survey data, real median household income rose from $60,200 in 2011 to $70,200 in 2021, with particularly large gains among people of color, helping to reduce racial inequalities. During this period, median incomes rose 28 percent among Asian households, 26 percent among Hispanic households, and 25 percent among Black households, as compared with 18 percent among white house holds. Nevertheless, enormous racial income dispar ities persist. At last measure, the median income for white households was $78,000, which was 35 percent higher than the $57,900 median for Hispanic house holds and 62 percent higher than the $48,100 median for Black households. Only Asian households, with a median income of in 2021, had incomes that exceeded white households. Households with low incomes, which are dispropor tionately headed by people of color, are more likely to be disadvantaged in housing markets because they are more likely to be cost burdened, less likely to live in opportunity-rich neighborhoods, and less likely to meet the income and downpayment requirements for homeownership. Against this backdrop, it is easy to draw a line from long-standing income inequality to even more dramatic and entrenched racial wealth disparities. According to the latest Survey of Consumer Finances from 2019, the median net wealth for white households was more than five times the $36,000 median for Hispanic households, nearly eight times the $24,100 median for Black households, and over two and a half times the $74,500 median for households of all other races, including Asian. The Outlook The pandemic era of rapid household growth, fueled by the release of pent-up demand from millennials to form their own households, appears to be nearing an end as headship rates among most age groups have recovered much of the losses incurred since the Great Recession. Going forward, population growth will once again become the main driver of household growth, as has been the case for decades. However, population growth is at a near-record low, with little sign of recovery on the horizon. Birth rates are declining and mortality rates are rising, consistent with the aging of the enormous generation of baby boomers, many of whom are in their mid-70s. Consequently, low population growth is likely for the foreseeable future, leading to both a reduction in household growth and an increased reliance on international and domestic migration to fuel new household formations. While the homeownership rate increased in 2022, by the end of the year the higher costs appeared to be taking a toll as the rate of homeownership growth slowed. Meanwhile, many homeowners thrived, with home equity levels hitting new highs and delinquency and foreclosure rates remaining low. That said, aggregate data may somewhat mask the distress experienced by more financially vulnerable home owners, underscoring the continued and urgent need to reduce the nation’s gaping racial homeownership disparities and expand access to affordable homeownership among people of color, especially in light of the increased cost of homebuying. These increased costs have left millions of house holds unable to afford to buy a home. As of March 2023, monthly mortgage payments on the US medi Note: Estimates assume a 3.5% downpayment on a 30-year fixed-rate loan, 0.85% mortgage insurance, 0.35% property insurance, 1.15% property taxes, 3% closing costs, and a maximum 31% debt-to-income ratio. Source: JCHS tabulations of Freddie Mac, Primary Mortgage Market Surveys; NAR, Existing Home Sales. Homeowner Cost Burdens Skyrocket As homebuyer affordability has deteriorated, cost burdens among current homeowners have climbed sharply. As a result, 19.0 million homeowner households, or 22.7 percent, were burdened by monthly housing costs in 2021, of which 8.7 million (10.4 percent of all homeowners) had housing costs that exceeded 50 percent of their income. Consequently, the Housing Vacancy Survey indicates the US homeownership rate grew to 65.8 percent in 2022, up from 65.5 percent a year earlier and continuing the six years of consecutive homeown ership growth started in the aftermath of the Great Recession, after rates bottomed out at 63.4 percent in 2016. Younger households were the primary drivers of the increase. For households under age 35, home ownership rates rose by 0.8 percent in 2021–2022 to 39.0 percent, and have now risen 2.3 percentage points since 2019. Likewise, homeownership rates for those ages 35–44 also increased, up 2.1 percentage points since 2019, to 62.2 percent, as more millennials entered the market after experiencing financial constraints during the Great Recession that forced them to delay homeownership. Homeowner Households Homeownership Rate (Right scale) Note: Estimates for 2020 are omitted due to data collection issues experienced during the pandemic. Source: JCHS tabulations of US Census Bureau, Housing Vacancy Surveys. Homeowners with low incomes were only one of the many vulnerable populations whose burden rates increased between 2019 and 2021. Cost burdens affected a quarter of all homeowners age 65 and over (26 percent) and more than a third of all single- person (39 percent) and single-parent (36 percent) homeowner households in 2021. Additionally, burdens reached nearly a third of all Black (31 percent) and Hispanic (29 percent) homeowners and more than a quarter (26 percent) of Asian homeowners, compared with one in five white homeowners (21 percent). Such high rates of burden leave many homeowners strug gling to pay for other monthly necessities and acutely vulnerable to sudden losses of income, urgent home repairs, or other financial shocks. The overall homeownership rate has been further boosted by the nation’s aging population. Older adults have the highest homeownership rates of any age group, with 79 percent of households ages 65 and older owning a home in 2022. While homeownership rates for older households have remained relatively stable, hovering between 78.5 and 80.0 percent since 2016, their share of households rose from 24 percent to 27 percent during that period and has helped to lift the overall homeownership rate. Nevertheless, these low overall rates of serious delin quency conceal higher levels of distress among homeowners. Fully loans that have exited the forbearance program are either delinquent or in loss mitigation, while an additional loans are in active foreclosure or liquidation following their forbear ance plan exit, as of April 2023. This financial distress disproportionately impacts households with low incomes and people of color. According to the Census Bureau’s Household Pulse Survey, rates of missed payments for Black (10.3 percent), Asian (10.1 percent), and Hispanic homeowners (7.9 percent) were each well above the share reported by white homeowners (3.8 percent) in late 2022. Racial income inequality plays a role in these disparities, as households of color are more likely to have lower incomes, and are also much more likely to be behind on payments. Overall, 13.0 percent of homeowners earning less than $25,000 reported being behind on housing payments, along with 9.8 percent of homeowner households earning between $25,000 and $50,000, versus less than 4 percent of homeowners earning $75,000 or more. While the bulk of the Homeowner Assistance Fund remains unobligated and thus will be able to assist some distressed homeowners, more resources will be needed to help homeowners after the fund is fully committed. On the other hand, Black households’ pandemic-era homeownership gains may be at least partially a product of the low Black homeownership rate before the pandemic. While Black homeownership rates have increased modestly since the eve of the pandemic in 2019, rates for Black households were then near their lowest levels in decades. This was due at least in part to the fact that Black households did not share equally in the economic recovery experienced by white and Hispanic households after homeowner ship rates bottomed out in 2016. And so, while the low interest rates of 2020 and 2021 helped Black home ownership rates to begin to catch up, the progress was only incremental. Hispanic householders may be of any race. Source: JCHS tabulations of US Census Bureau, Housing Vacancy Surveys.

[Assistant] The Outlook Over the coming year, overall higher housing costs will continue to make access to homeownership a challenge. That said, interest rates have plateaued and home prices have declined modestly in much of the nation since mid-2022, allowing buyers time to adjust to these new conditions. Homeownership demand persists, evidenced by the rise in loan appli cations that has accompanied every dip in interest rates in recent months. Against this backdrop, poli cymakers and practitioners will need to continue to adapt homeownership programs to improve access to affordable homeownership; address the racial dispar ities in income, wealth, and access to credit that fuel the nation’s racial homeownership rate gaps; and increase the housing supply to satisfy anticipated demand from future buyers. Additionally, policies for distressed homeowners are needed to stave off poten tial harms when the next economic downturn arrives.


[User] 05 A drop-off in demand is cooling the formerly heated rental markets. Rental vacancy rates are climbing from historic lows, and rent growth is slowing from last year’s all-time high. Nonetheless, rents are still rising, the supply of low-rent units is falling, and new construction is adding primarily to the high-end rental stock. In response, renter cost burdens have risen to their highest recorded level, underscoring the worsening affordability challenges facing many renters with lower incomes. R E N TA L H O U S I N G Slowing Demand for Rental Units Rental demand declined in early 2023. According to the Housing Vacancy Survey, the number of renter households decreased by between the first quarter of 2022 and the first quarter of 2023. The recent decline came after a surge in rental demand early in the pandemic, when the number of renter house holds grew by 1.0 million between the first quarter of 2020 and the first quarter of 2022, an implied annual average increase of renter households. Note: Estimates for 2020 are omitted due to data collection issues experienced during the pandemic. Source: JCHS tabulations of US Census Bureau, Housing Vacancy Surveys. Softening Rental Markets Cool Multifamily Investor Demand Slowing rent growth, combined with rising vacancies, interest rates, and operating costs, has hurt multifamily property performance through early 2023. In the first quarter of 2023, the rental vacancy rate increased to 6.4 percent, up from its lowest level in decades (5.6 percent) in the fourth quarter of 2021, according to the Housing Vacancy Survey. Meanwhile, the vacancy rate in the professionally managed apartment segment increased even more dramatically, reaching 5.2 percent in early 2023, according to data from Real Page, nearly 3 percentage points above its record-low reading of 2.5 percent in the second quarter of 2022. Between the first quarter of 2022 and the first quarter of 2023, rents for units in professionally managed apartments were up by just 4.5 percent—well below the record-high annual rate of 15.3 percent one year earlier at the height of the pandemic-era surge, but nearly a percentage point above the 3.6 percent rate averaged in the five years Notes: Asking rents are for professionally managed apartments in buildings with five or more units. Class A (Class C) apartments are relatively higher (lower) quality. Source: RealPage. According to data from RealPage, the net number of occupied apartments within the professionally managed segment dropped by between the first quarter of 2022 and the first quarter of 2023. This drop-off in apartment demand marked a sharp reversal from the surge in the first quarter of 2022, when the net number of occupied apartments increased by a record-breaking units annually. Several factors have contributed to the recent drop-off in rental demand. Many renter households with higher incomes transitioned to homeownership during the pandemic-era homebuying boom. Further, demand may simply be normalizing after the temporary surge in rental household formations that happened when restrictions were lifted. Lastly, high inflation rates, rapidly rising rents, and economic uncertainty may have presented additional barriers to household formation, either disincentivizing or simply preventing some individuals from moving out of homes shared with family or roommates to form new households. leading up to the pandemic. This slowdown in the pace of rent growth occurred across property classes. Rents for higher-cost Class A units, which increased at a rapid annual rate of 18.5 percent in the first quarter of 2022, grew by just 4.8 percent in early 2023. Rent growth for lower-cost Class B and Class C units also deceler ated but remained slightly higher than pre-pandemic averages. Rents for Class B apartments grew by 4.2 percent annually in early 2023, down from a peak of 16.1 percent, and rents for Class C apartments grew by 4.6 percent, down from a peak of 9.5 percent. Cooling market conditions along with increased oper ating costs have reduced multifamily investment activity. Indeed, rising costs of labor, maintenance materials, insurance, and property taxes pushed oper ating expenses up nearly 8 percent in 2022, according to Yardi Matrix. Consequently, net operating income growth dropped to 8.1 percent on a four-quarter trailing basis in the first quarter of 2023, down from a pandem ic-high of 24.8 percent in the second quarter of 2021, according to the NCREIF Property Index. As a result, investor activity decreased precipitously. Transaction volumes declined to $26.7 billion in the first quarter of 2023, fully 50 percent lower than the $53.2 billion recorded a year earlier and 23 percent lower than the same period in 2019. The reduction in multifamily investment comes after an extended period of strong property performance. Apartment prices fell 10 percent annually in March 2023 but were still up 131 percent over the past decade, according to Real Capital Analytics. The longer-term strong financial performance attracted non-individual investors such as LLPs, LLCs, real estate corporations, and others to the market. According to the Rental Housing Finance Survey, the share of rental proper ties owned by non-individual investors increased by 9 percentage points over the past two decades to 27 percent in 2021. New Construction Targets High-End Market Multifamily production was extraordinarily strong over the past year, with multifamily rental units added in 2022 alone, mostly targeting the high end of the market. According to data from the Survey of Market Absorption, in the third quarter of 2022, the median asking rent for new units reached $1,805, an increase of $125, or 7 percent, from the $1,680 median in the third quarter of 2015 after adjusting for inflation. This growth in rents has shifted the distribution of asking rents for new multifamily units. Between 2015 and 2022, the share of newly completed units with asking rents JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY THE STATE OF THE NATION’S HOUSING Rising rents are at least partly driven by increased amenities in new units to meet demand from house holds with higher incomes. For example, in percent of multifamily for-rent completions had in-unit laundry, an all-time high and well above the 76 percent share in 2011. Additionally, new multifamily construction remains highly concentrated in large metro areas, where land is most expensive. According to the National Association of Home Builders’ Home Building Geography Index, 70 percent of multifamily permitting in the third quarter of 2022 was in large metro areas, including 38 percent in core counties and 28 percent in suburban counties. In comparison, just 27 percent of multifamily permitting was in small metro areas and under 4 percent was outside metro areas. Because rental demand has been strongest in high- cost urban centers, multifamily completions have become increasingly concentrated in large buildings. Apartments in buildings with at least 20 units consti tuted 89 percent of new multifamily completions in 2021, up from 77 percent a decade earlier, according to the Census Bureau’s Survey of Construction. Units in buildings with at least 50 units rose from 30 percent of all new units in 2011 to 59 percent in 2021. During those same two years, virtually every state saw declines in their low-cost rental stock, with 36 states losing more than 10 percent of units with contract rents below $600 and 14 states losing more than 15 percent. Many states with the most substantial losses were previously more affordable but have experienced increasing demand and relatively strong population growth. For example, the number of units with rents below $600 declined by 86,000 in North Carolina, more than in any other state, and also dropped significantly in Georgia (67,000) and Texas (64,000). Other large losses were recorded in less expensive Midwestern states experiencing slower population growth, including Ohio (73,000), Illinois (63,600), Missouri (44,000), Indiana (41,000), and Michigan (40,000). In 2021, the number of cost-burdened renter households reached 21.6 million, the highest recorded level since 2001, according to the American Community Survey. This number increased swiftly during the pandemic, growing by 1.2 million households between 2019 and 2021. Households that were severely cost burdened accounted for most of the growth, increasing by 1.1 million households to 11.6 million. While the share of renter households with cost burdens had declined nearly every year since 2014, the sharp increase in 2021 reversed this trend, increasing the cost burden rate by 2.6 percentage points to 49.0 percent of renter households. Renters with low incomes are by far the most likely to be cost burdened. In 2021, fully 85 percent of households with incomes below $15,000—the approximate wages JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY THE STATE OF THE NATION’S HOUSING of a person working full-time at the federal minimum wage—were cost burdened, the vast majority of whom (76 percent) were severely burdened. In addition, 81 percent of households earning between $15,000 and $29,999 were cost burdened—well above the 9 percent of households with incomes of $75,000 or more. Under –––and Over All Households Household Income Notes: Incomes are adjusted for inflation using the CPI-U for All Items. Cost-burdened households spend more than 30% of income on housing. Source: JCHS tabulations of US Census Bureau, American Community Survey 1-Year Estimates. While 43 percent of Asian and 45 percent of white renter households were cost burdened in percent of Black renter house holds were burdened, along with 53 percent of Hispanic renters, 50 percent of both Native Hawaiian and Pacific Islander and multiracial renters, and 47 percent of American Indian and Alaska Native renters. Half of renters living in metropolitan areas were cost burdened in 2021, compared with 41 percent in smaller metropolitan areas and 39 percent in rural areas. Despite the relatively lower rate, renter households living in rural areas were cost burdened in 2021, including households who were severely burdened. Cost-burden rates also varied significantly by metro, with higher cost-burden rates concentrated in areas with higher rents, larger shares of households with low incomes, or some combination of the two. Examples include Miami (61 percent), Los Angeles JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY THE STATE OF THE NATION’S HOUSING While increasing cost burdens are widespread, rates vary by geography and household characteristics. Yet, the primary driver is the same: rents have been rising faster than incomes. Between 2019 and 2021, the median monthly rent increased 3 percent while the median renter income fell 2 percent. The disparities are even worse for renters with lower incomes. For renter households making less than $30,000 a year, rents rose 5 percent in real terms between 2019 and 2021 while incomes fell by 6 percent. Consequently, the median residual income—the amount of money that remains after paying housing costs—fell 5 percent for all renters, while residual incomes for renters earning less than $30,000 annually fell by 22 percent to the lowest level in two decades. This left these renters with an average of just $380 per month to cover all other needs and increasingly thin financial margins. Recent declines in real incomes and increases in rents produced a record-high number of renter house holds with housing cost burdens. Although the pace of rent growth in the professionally managed segment is slowing from its record-breaking post-lockdown surge, atypically fast rent growth and high inflation will continue to put pressure on household budgets in the short term. Moreover, new construction continues to target the high end of the market, while the declining number of low-rent units will leave renters who have low and moderate incomes with fewer affordable options. Even though multifamily construction is at historic highs, increasing production of moderately priced rental housing is an urgent priority.

[Assistant] The national housing shortage is also the product of local restrictive zoning policies and other regula tory barriers that make it difficult to build a range of housing types at different price points. An estimated 75 percent of land in many cities is zoned exclusively for single-family homes. Growing policy momentum at the federal level seeks to address restrictive zoning. For example, the 2023 omnibus appropria tions bill included $85 million in HUD grants for cities to identify and implement reforms that will increase density, reduce minimum lot sizes, and streamline permitting processes.


[User] Increasingly, the federal government has turned to tenant-based assistance in the form of Housing Choice Vouchers, which typically cover the difference between 30 percent of a household’s income and their rent, up to a local fair market rent. However, the program’s regulatory requirements and inspec tions can be cumbersome for landlords, who are not required to accept vouchers in most places. Laws that prevent discrimination against voucher holders could help renters successfully use vouchers and have recently been adopted in Hawaii, Illinois, and several cities, but do not address landlords’ concerns with the program. Preserving subsidized housing in all its forms requires additional resources. The national Housing Trust Fund (HTF) is one flexible source of funding that could help. Additionally, HTF resources are modest compared with the scale of the problem and are split between new construction and pres ervation. According to the National Low Income Housing Coalition, just 15 percent ($41 million) of the 2018 HTF allocations went to preserving existing affordable units.

[Assistant] Compared with renters, homeowners fared better during the pandemic, both because they were less likely to lose employment income and because those unable to make their mortgage payments benefited from widely available forbearance protections. Never theless, delinquencies are a concern for about 2 million homeowner households. The $9.9 billion provided through the Homeowner Assistance Fund will help some to make mortgage, homeowner’s insurance, and utility payments. By the fourth quarter of 2022, $3.8 billion was obligated, providing critical assistance for over households. However, with more than a third of available resources already spent, the fund will likely be depleted quickly.


[User] As federal pandemic housing assistance programs wind down, state and local governments are turning to general fiscal recovery funds to meet ongoing housing needs. With longer spending timelines and more potential uses, $14.2 billion of state and local fiscal recovery funds were budgeted as of September 2022 to support nearly 1,800 housing affordability proj ects and programs to address short- and longer-term housing needs. At the end of 2021, these funds had already helped households with rent, mort gage, or utility assistance and households with eviction prevention services. The experience with pandemic assistance for both emergency and longer- term housing needs has demonstrated that these are effective means to keep people stably housed and merit continued support. Today, new federal resources are available to address homelessness. The 2023 omnibus spending bill provided $3.6 billion for homelessness assistance grants and $2.7 billion to support veterans experiencing homelessness. The 2021 the American Rescue Plan Act included $5 billion for state and local governments to fund services, shelter, and housing for unhoused people and at-risk households through the HOME-ARP program. Smaller efforts included $315 million in grants to address rising unsheltered and rural homeless ness. Additionally, state and local governments have collectively committed more than $3.3 billion in fiscal recovery funds to homelessness services and housing. Nevertheless, more funding is needed to meet the scale of the challenge, including increased support for rental housing assistance and affordable housing to help address the root of the problem. Modifications to the existing housing stock are also needed to reduce greenhouse gas emissions from the residential sector, and several recent efforts aim to help households make incremental changes. The Inflation Reduction Act of 2022 provided almost $9 billion in energy-efficiency and electrification rebates, and also extended tax credits, such as the Residential Clean Energy Credit, that incentivize homeowners to make energy improvements. Likewise, the Infrastruc ture Investment and Jobs Act provided an additional $3.5 billion to the Weatherization Assistance Program, which helps 35,000 low-income households make energy-efficient upgrades in a typical year. temporary housing and home repairs. In 2022, FEMA provided $1.9 billion to 1.2 million households through this program. To fill gaps in FEMA assistance, the 2022 Rapid Unsheltered Survivor Housing (RUSH) program enables communities to provide emer gency shelter, rapid re-housing, and homelessness services after disasters. However, these funds are limited, with $56 million initially set aside and $6.8 million allocated to Florida after Hurricane Ian. For long-term recovery, Congress also appropriated a total of $10 billion of Community Development Block Grant Disaster Recovery funds in 2021–2023 to help communities rebuild. Ultimately, to adapt to increasing risks from climate change, less development on high-risk land, phys ical improvements to reduce exposures, and better household awareness of risks will be necessary. FEMA’s Hazard Mitigation Grant Program has supported such efforts, including the New Jersey Blue Acres Buyout Program, which pairs property acquisitions with supportive services to manage retreat from flood- prone areas. Stronger building codes for new construc tion in hazard-prone areas can also help to prevent an estimated $1.6 billion per year in losses, according to a recent FEMA study. Over the longer term, mitigation efforts and disaster response will require a substantial commitment from federal and state governments to help high-risk communities.

[Assistant] Investing in communities of color is critical for addressing these racial inequities. However, care must be taken to mitigate the risk of displacement of current residents. Mindful of that balance, Enterprise Commu nity Partners launched the Equitable Path Forward program in 2020, an initiative expected to leverage $3.5 billion over five years to extend capital to communities of color and diversify the real estate industry. In Seattle, the 2021 Equitable Communities Initiative started with an initial $100 million commitment to invest in BIPOC communities and housing. The city also created the Equitable Development Monitoring Program to track community indicators related to race and social equity and to mitigate displacement risks.


[User] Homeowner cost burdens are also on the rise, driven by growing taxes and insurance costs. For renters, the number with cost burdens has hit an all-time high as rents have escalated. While single-family construction is accelerating and a surge of new multifamily rental units is slowing rent growth, any gains in affordability are likely to be limited by robust household growth, ongoing development constraints, and high construction costs. All stakeholders must work together to address the affordability crisis and many related urgent housing challenges, including the inadequate housing safety net, the record number of people experiencing homelessness, and the growing threat of climate change. Housing Costs Continue to Rise Lack of affordability defines both the for-sale and the for-rent housing markets. Home prices rebounded to a new all-time high in early 2024 despite persistently elevated interest rates. After declining briefly in early 2023, home prices ended the year up 5.6 percent annually and continued to rise in early 2024 at an annual rate of 6.4 percent in February, according to the S&P CoreLogic Case-Shiller US National Home Price Index. Home price growth was widespread in early 2024, occurring in 97 of the top 100 markets, with higher increases in the Northeast and Midwest and more muted growth in the South and West. Additionally, home insurance premiums grew an average of 21 percent between May 2022 and May 2023 alone, according to Policygenius, and property taxes are on the rise, further increasing the cost of homeownership. In the rental market, although rent growth slowed to just 0.2 percent year over year in early 2024, rents remain up 26 percent nationwide since early 2020 after rapid pandemic-era growth. Rents are rising in three out of every five markets, including in much of the Midwest and Northeast. Declines were contained mostly to markets in the West and South, though rents there were still up from pre-pandemic levels by an average of 21 and 28 percent, respectively. Cost Burdens Hit Record Highs In the face of rising housing costs, burden rates are increasing. The number of cost-burdened home owners, those who spend more than 30 percent of household income on housing and utilities, grew by 3 million to 19.7 million between 2019 and 2022. Nearly one in four homeowner households (23.2 percent) are now stretched worryingly thin, including 27.4 percent of homeowners age 65 and over. Households earning less than $30,000 annually constituted over half of the growth in cost-burdened homeowners from 2019 to 2022. While such burdens are difficult for any household, they present distinct challenges for these homeowners. During this period, homeowners with incomes under $30,000 saw their residual incomes—the amount of money left over each month after paying for housing and utilities— fall 18 percent to just $627 after adjusting for infla tion, forcing tough choices among daily necessities, basic home maintenance and repairs, and possibly accessibility improvements. Among renters, cost-burden rates have increased across the income spectrum. Still, renters with the lowest incomes have the highest cost-burden rates. Fully 83 percent of renter households earning less than $30,000 annually were cost burdened in 2022, including 65 percent (9.4 million households) with 0 Renters Homeowners Notes: Cost-burdened households spend more than 30% of income on housing and utilities. Estimates for 2020 are omitted due to data collection issues experienced during the pandemic. Source: JCHS tabulations of US Census Bureau, American Community Survey 1-Year Estimates. More than half of Black (57 percent), Hispanic (54 percent), and multiracial (50 percent) renter house holds were cost burdened at last measure in 2022. Rates were lower for white (45 percent), Asian (44 percent), and Native American (44 percent) house holds. While racial income inequality explains some of the difference, burden rates remain disproportionately high for lower-income renters of color, at 85 and 87 percent for Black and Hispanic renters, respectively, as compared to 80 percent of their white counterparts. Household Growth Still High Despite high housing costs, household growth remained robust through last year. The nation gained 1.7 million households between 2022 and 2023, according to the Housing Vacancy Survey. Though lower than the previous year’s 1.9 million new house holds, this is still a significant uptick from the 1.1 million annual pace averaged in the 2010s. Another major contributor to robust household growth is ballooning immigration, which peaked at 3.3 million in 2023 according to the Congressional Budget Office, after averaging annually in the 2010s. The majority of this increase is asylum seekers facing challenges that will slow their housing trajectories. But household growth may remain strong for some time, as this population will eventually form households. New Units Soften Rental Market Multifamily completions rose by 22 percent to in 2023, the highest annual level in more than three decades, and the number of units under construction in March 2024 remained near the record high. Real Page reports vacancy rates in professionally managed apartments rose to 5.9 percent at the beginning of 2024, more than twice the record low of 2.5 percent recorded in early 2022. At the same time vacancies have risen, so have oper ating costs, straining property owners’ balance sheets. As of January 2024, apartment operating expenses increased by 7.1 percent year over year, according to Yardi Matrix, led by a 27.7 percent nationwide average increase in owners’ insurance premiums. Against this backdrop, net operating income growth fell to 2.8 percent in the first quarter of 2024, down from 8.1 percent a year earlier. These declines affected valu ations: apartment property prices fell in 2023 for the first time in more than a decade, down more than 10 percent nationwide by the end of the year, according to Real Capital Analytics. By March 2024, prices were falling 8.4 percent year over year. Low For-Sale Inventories Lead Homebuyers Toward New Homes Existing homes for sale remain in short supply. Just 1.1 million homes were available for purchase in March 2024, down from 1.7 million in March of 2019, according to the National Association of Realtors (NAR). This is just 3.2 months of supply, even with the current reduced sales rate. Annual existing home sales dropped 19 percent to 4.1 million in 2023, nearly a 30-year low. With few existing homes for sale, aspiring home buyers are turning to new construction. New home sales increased by 4 percent in 2023, constituting 15 percent of all single-family home sales compared to 12 percent just two years earlier. Though down for the year in 2023, single-family starts rose to an annualized rate of 1.06 million units in the last quarter, a 25 percent year-over-year increase. Homeownership Increasingly Out of Reach The high affordability hurdle has reduced the number of first-time homebuyers and slowed the growth in homeownership over the past year. According to the Housing Vacancy Survey, the homeownership rate for households under age 35—a key first-time homebuyer demographic—fell 0.4 percentage points over the last year as first-time homebuying dropped. As a result, the US homeownership rate across all age groups inched up just 0.1 percentage points in 2023 to 65.9 percent, the smallest increase since 2016. The rate on the 30-year fixed-rate mortgage peaked in October 2023, hitting 7.79 percent, the highest in more than 20 years, according to the Freddie Mac Primary Mortgage Market Survey. After a brief dip in early 2024, rates were again over 7.0 percent by mid-April, more than twice the 3.0 percent rate averaged across 2020 and 2021. This combination of rising interest rates and home prices pushed the median payment on home mort gage applications up $108 over the past year (to $2,201), according to the Mortgage Bankers Associa tion, and the median is now up more than $850 over the last three years. To afford such a high payment under common payment-to- income ratios, a borrower would need an annual income of at least a threshold just one in seven (6.6 million) of the nation’s 45 million renter households can meet. It now takes an annual house hold income of at least to afford the median- priced home in nearly half of all metro areas. Although rising home prices are a barrier for first-time buyers, the recent rapid home price appreciation has provided substantial equity gains for many home owners. According to CoreLogic, the average home equity among owners with mortgages increased $24,000 in 2023 and over the past four years. As of the fourth quarter of 2023, the average mort gaged home equity is a substantial . Many current homeowners, especially those with higher incomes, are also enjoying the benefits of past histor ically low mortgage interest rates. Having locked in fixed rates with lower monthly payments, homeowners as a whole are paying less on housing debt service as a percentage of income than at any time since 1980. Monthly Payment Four-Quarter Average Notes: Payments are inflation adjusted using the CPI-U for All Items Less Shelter. Monthly payments assume a mortgage with a 3.5% downpayment on a 30-year fixed-rate loan with zero points and 0.55% mortgage insurance, 0.35% property insurance, and 1.15% property tax rates. Source: JCHS tabulations of Freddie Mac, Primary Mortgage Market Surveys; National Association of Realtors, Existing Home Sales. Expanding the Housing Safety Net Growing numbers of income-eligible households need housing assistance but don’t get it. The number of very low-income renter households increased by 4.4 million from 2001 to 2021, while the number of assisted households increased by just . As of 2021, three in every four income-eligible renter households go without help. Additionally, a record-high 8.5 million of these very low-income households had worst case housing needs, spending more than half their income on housing or living in severely inadequate housing, according to HUD. Given the hardships facing the vast majority of renters with very low incomes, expanding assistance is imper ative. But federal funding has not grown to meet the rising need, and as housing costs increase, simply maintaining current levels of support requires more funding each year. In need of additional resources, many state and local governments are expanding their funding for housing assistance. They’ve been aided by roughly $3 billion generated annually through housing trust funds, multifamily private activity bonds that totaled $17.2 billion at last measure in 2020, and nearly $18 billion allocated to housing needs through American Rescue Plan state and local fiscal recovery funds. While every bit helps, these efforts pale in comparison to the scope of the housing crisis, and increased federal resources are critical to meaning fully addressing the need. The Growing Threat of Climate Change to the Nation’s Housing Stock The housing stock is increasingly at risk of damage from severe hazards. At last count, 60.5 million housing units were located in areas with at least moderate risk, according to the Federal Emergency Management Agency (FEMA) National Risk Index. An effective response requires both structural adaptations and financial resources to increase household, building, and land resiliency, and to reduce future risks by shrinking the residential sector’s carbon footprint. Federal resources are available to shore up the housing stock against the impacts of hurricanes, floods, wild fires, and other hazards. Eligible activities are property acquisition, retrofits, floodproofing, and long-term planning, among other strategies. Yet FEMA’s hazard mitigation programs deliver an average of less than $2 billion annually to states and tribal nations, and signifi cantly more resources and strategies are needed to increase properties’ resiliency. To date, the bulk of the funding has been dedicated to recovery and adaptation after a disaster. The programs help the hardest-hit households and communities after an event but are not designed to make households whole. This approach could leave critical needs unmet at a moment of extreme household vulnerability. However, the upfront cost of retrofits can be significant and a barrier to implementation. To help reduce costs, the Inflation Reduction Act of 2022 allocated more than $9 billion for rebates and expanded property owner tax credits, and another $27 billion to leverage financing for community and residential energy- efficiency improvements, among the largest such federal investments. Along with additional resources for the Weatherization Assistance Program through the Infrastructure Investment and Jobs Act of 2021 and various state resources, there is a concerted effort to mitigate housing’s impact on climate change and reduce household energy burdens.

[Assistant] The Outlook Looking forward, housing costs are likely to remain high. On the for-sale side, home prices are set to rise in the face of highly constrained supply, prolonging this unusually difficult market for first-time homebuyers. On the rental side, there may be some affordability gains in the near term. Wage growth is high and the nearly 1 million new multifamily units currently under construction will soon come online, suppressing rent growth. But subdued rent growth will not last long. New construction starts are dropping rapidly, and financial conditions are increasingly impeding multi family development projects.


[User] Further pressuring the housing markets are the nation’s shifting demographics. Housing demand will remain strong in the near term, fueled by the immigration surge, household formations among Gen Zers, and the large millennial generation’s shifting housing needs.

[Assistant] However, demand is expected to slow over the longer term. Native-born population growth is decel erating and will soon turn negative as baby boomer mortality rates overtake birth rates. Immigration will then become the primary, albeit much less predict able, source of population and household growth. Households across the income spectrum will continue to struggle to secure affordable housing. Yet the shortage will remain most acute for those with low incomes, especially if the nation continues to lose low-rent units even as the population of financially vulnerable households grows. While regulatory relief and technological innovation can help to grow the private supply of lower-cost housing, there is also a need to expand the housing safety net beyond the market’s reach to serve the growing number of renters with very low incomes.


[User] 02 H O U S I N G M A R K E T S Rising home prices, elevated interest rates, and a limited supply of homes for sale have forced many potential homebuyers out of the market. Existing home sales fell to a near three-decade low in 2023. By contrast, rental vacancy rates are rising and rent growth has stalled as a large volume of new apart ments comes online. Homebuilders and developers face numerous barriers to providing housing at the cost, quantities, and locations needed most. Home Prices Rising Again After a brief period of decline, home prices turned upward in early 2023 despite persistently higher interest rates. Since then, home prices have rebounded and were up 6.4 percent year over year by February 2024, or 4.5 percent when adjusted for inflation. In 2023, the median sales price for existing homes in the US was as compared to in 2019, according to NAR. As home prices have risen, they have grown to many multiples of household income. In 2022, the median sales price for existing single-family homes rose to 5.1 times the median household income, up from 4.1 in 2019 and the 3.2 price-to-income ratio averaged in the 1990s. Though this ratio dipped slightly to 4.9 in 2023 as home price growth slowed, it nonethe less means that homeownership is unaffordable for many households. Constrained Inventory Fuels Declining Home Sales The limited supply of housing for sale has helped fuel the rise in home prices. As a result, a scant 3.2 months of for-sale inventory was available in March 2024 versus 3.8 months in March 2019. In the first quarter of 2024, inven tory was down an average of 42 percent in 94 of the 100 largest metros relative to the same period in 2019, according to Center tabulations of Realtor.com data. Declines were steepest in Northeastern metros with the strongest home price growth, including Hartford, Bridgeport, and Providence, where they exceeded 70 percent. Inventories were up in just six markets, concentrated mostly in the South, including San Antonio, Lakeland, and Austin. Though the number of homes available for purchase remains alarmingly low, for-sale inventories have Months of Supply (Right scale) Inventory Notes: Months of supply measures the length of time needed at the present pace to sell homes currently listed for sale. A balanced market is typically considered six months. Source: JCHS tabulations of National Association of Realtors, Existing Home Sales. The dearth of inventory has led to a substantial reduc tion in existing home sales. This was the lowest level of existing home sales in nearly 30 years—lower even than in 2008 (by 23,000)—and a striking 33 percent decrease from the 6.1 million homes sold in 2021. The 2023 decline was widespread, with 30 percent fewer sales in the Midwest, 31 percent fewer in the South, 35 percent fewer in the Northeast, and 41 percent fewer in the West, as compared to 2021. Meanwhile, new single- family home sales climbed modestly last year, up 4 percent to units in 2023. With limited competition from existing sellers, new construction is giving homebuyers more options. New JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY THE STATE OF THE NATION’S HOUSING Existing, Single-Family Existing, Condo and Co-op New, Single-Family (Right scale) Source: JCHS tabulations of National Association of Realtors, Existing Home Sales; US Census Bureau, New Residential Sales. To improve affordability for buyers without lowering prices, large homebuilders increasingly offer mort gage rate buydowns: homebuyers who purchase a new home through a partnering lender benefit from an interest rate reduction paid for by the builder. Rate buydowns offset current high interest rates and lower monthly payments. According to an April 2024 survey by the National Association of Home Builders (NAHB), about a quarter of homebuilders used mortgage rate buydowns to bolster sales, up from just 4 percent during the same month in 2019. Rate buydowns are most common among large builders. According to a September 2023 survey by John Burns Research and Consulting, 60 percent of production builders offered interest rate buydowns. Single-Family Multifamily Single-Family Historical Average Multifamily Historical Average Note: Single-family and multifamily historical averages are of seasonally adjusted monthly data from January 1990 to March 2024. Source: JCHS tabulations of US Census Bureau, New Residential Construction. Despite declining starts, the multifamily stock continued to grow in 2023 as projects in the development pipeline reached completion. Indeed, new multifamily units hit the market in 2023, a 22 percent increase from the previous year and the highest number of comple tions in more than three decades.

[Assistant] Completions will likely remain elevated at least for a time, as multifamily units were under construction in March 2024, just shy of the record high of over 1 million units reached in 2023. Even so, this is a 3 percent decline from last year’s total.


[User] These units command higher asking rents in part because of the rising costs of land, building materials, and labor, and also because of where they are built and the amenities they increasingly offer. According to the NAHB Home Building Geography Index, 68 percent of new multifamily units were located in large metros in the fourth quarter of 2023, including 38 percent in those metros’ core counties. Another 24 percent were in the core counties of smaller markets. Consistent with new construction trends over the last several years but higher than the rates observed in previous decades, 97 percent of multifamily units completed in 2022 had air conditioning and 88 percent had in-unit laundry. Rental Vacancies Rise and Rent Growth Stalls Rental vacancy rates have increased considerably as more new rental units come online. The national rental vacancy rate hovered at 6.6 percent through the first quarter of 2024, up a full percentage point from the pandemic-era low of 5.6 percent in early 2022 and much closer to the 6.9 percent vacancy rate averaged in the five years leading up to the pandemic, according to the Housing Vacancy Survey. In the professionally managed apartment sector, 5.9 percent of units were vacant at the start of 2024, up from 5.2 percent a year earlier and 2.5 percent in the first quarter of 2022, according to RealPage. This is also significantly higher than the 4.8 percent vacancy rate averaged in the five years preceding the pandemic. Likewise, RealPage reports that vacancy rates rose to about 6 percent across property types. The lower- quality Class C apartments recorded the largest year-over-year increase (1.2 percentage points to 5.9 percent), followed by Class B (0.5 percentage points to 5.8 percent), and the highest-quality Class A apart ments (0.5 percentage points to 6.1 percent). These increases were geographically widespread. Vacancy rates increased annually in 135 of the 150 large markets tracked by RealPage, including 44 that reported growth of at least 1 percentage point. Vacancy rates increased the most in previously hot markets in the South and West, including Cape Coral (up 3.3 percentage points), Honolulu (up 2.8 percentage points), and Crestview, Florida (up 2.7 percentage points). Similarly, rent growth for single-family rental homes also tempered. According to CoreLogic’s Single-Family Rent Index, rents grew by just 3.4 percent annually in March 2024, much closer to pre-pandemic norms and a sharp retreat from the 14.0 percent annual peak growth rate recorded in April 2022. Though recent apartment rent trends have been wide spread, they have varied geographically. Rents have continued to rise in a majority of markets, with the most rapid growth in smaller, less expensive metros. There are a number of reasons builders and developers are unable to provide enough homes at affordable prices. According to a NAHB JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY THE STATE OF THE NATION’S HOUSING survey of homebuilders, high interest rates and rising inflation were the most frequently cited challenges in 2023, with more than 80 percent of respondents identi fying them as an obstacle to construction. Other chal lenges included the cost and availability of labor (73 percent), the price of building materials (63 percent), the cost and availability of developed lots (57 percent), and difficulties obtaining zoning or permit approvals (49 percent). According to Center tabulations of data from the Bureau of Labor Statistics (BLS), the number of job openings in the construction industry remains near record highs. On a 12-month trailing basis, construction jobs went unfilled at the end of 2023, down slightly from a year earlier but still up 20 percent from the openings at the end of 2019. At the same time, labor costs continue to rise. Total compensation for construction workers increased 3.7 percent year over year in the first quarter of 2024 and 14.2 percent since 2020, according to the BLS Employ ment Cost Index. The availability of developed land also remains a key impediment to increasing the supply of housing. Though lot availability was down just 1 percent year over year in the first quarter of 2024, it was down 11 percent from the first quarter of 2020 and 42 percent relative to the same quarter in 2015, according to the Zonda New Home Lot Supply Index. Moreover, the cost of land in many parts of the country continues to rise. According to the American Enterprise Institute’s Land Price and Land Share Indicators, the price of a stan dardized quarter-acre lot for existing single-family homes in the US grew 13 percent annually in 2022 and an astounding 51 percent since 2019. Finally, local zoning and regulatory barriers frequently impede new construction by restricting or deterring the types, amount, and density of housing that can be built. These regulations can take many forms, including exclusionary single-family zoning, large minimum lot sizes, and excessive parking require ments. Because land-use and zoning policies are administered at the local level, it’s often difficult to identify the full extent of these barriers and study their effects. But there have been numerous efforts in recent years to do so. The National Zoning and Land Use Database, for example, captures data from 2,639 municipalities. According to Center tabulations, 43 percent of jurisdictions have a minimum lot size of at least one acre in any residential district, nearly 10 percent don’t allow multifamily housing by right in any district, and a median of 1.8 parking spaces are required per new unit, on average.

[Assistant] In the rental market, rising multifamily completions and the number of apartments under construction will likely keep rent growth in check for a time. However, declining multifamily housing starts in the face of both higher interest rates and tighter lending standards mean those gains could be short-lived, as unafford ability in the for-sale market and the wave of young adult Gen Z households bolster rental demand.


[User] 03 D E M O G R A P H I C D R I V E R S Housing demand remains robust, driven by young adults forming new households, strong home- ownership demand from millennials and Gen Xers, and the baby boom generation lifting up the number of older adult households. Immigration surged in 2023 to a level not seen in decades, foreshadowing the expanding role of immigrants in sustaining housing demand as natural population growth slows. Even as wages rise, disparities in household finances persist, with some enjoying the benefits of enormous home equity gains while others are left struggling with low wealth and income and high housing costs. Note: Estimates for 2020 and 2021 are omitted due to data collection issues experienced during the pandemic. Source: JCHS tabulations of US Census Bureau, Housing Vacancy Surveys. The bulk of the recent household growth is among members of Gen Z (born 1995–2009) and millennials (born 1980–1994). As they entered peak household formation years, Gen Zers, the oldest of whom turn 29 in 2024, formed 8.1 million households on net from 2017 to 2022, according to the American Community Survey. The surge in immigration comes as natural population growth (births minus deaths) is slowing. Last year’s estimated increase continued a trend of declining growth from the aging population’s falling birth rates and rising mortality rates. With 3.65 million births and 3.15 million deaths in 2023, natural population growth was only last year, according to the Census Bureau. This is down from an increase of 1.3 million in 2013. Residential Mobility Continues to Decline The residential household mobility rate dropped by half a percentage point in 2023. This drop is attribut able mainly to homeowners moving less often. The homeowner mobility rate fell a full percentage point, from 4.6 percent in 2022 to 3.6 percent in 2023, the lowest rate in the past forty years, according to the latest Current Population Survey (CPS). Faced with high interest rates, homeowners with below-market mortgage rates were disincentivized to sell. At the same time, many potential buyers were stymied by either the high cost of homeownership or the limited supply of homes for sale. The result was a population with fewer choices or incentives to relocate. Meanwhile, renter mobility rates inched up by half a percentage point but remained relatively low after long-term declines. New supply has recently come online, creating additional options for renters and reducing record-high lease renewal rates. Even so, the renter mobility rate remained close to 17 percent in 2023, according to the CPS, a full 7.5 percentage points lower than a decade prior. Regionally, domestic moves continued to fuel growth in the South, the only census region to report net gains from domestic migration at last measure in 2023. Domestic inflows in this region remain higher than pre-pandemic norms, though the South has consistently gained migrants for the past decade. The Northeast and Midwest census regions saw consis tent outflows leading up to and during the pandemic, JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY THE STATE OF THE NATION’S HOUSING After the Federal Reserve instituted a series of interest rate hikes, inflation cooled in 2023 and still the economy managed to avoid a recession. The labor market added an average of more than jobs per month in 2023, and the unemployment rate held steady under 4 percent throughout the year. Addition ally, wage growth began to exceed inflation in early 2023, according to the the Bureau of Labor Statistics, a welcome change of pace when compared to the decline in real wages in 2022. These economic improvements are especially good news for households with lower incomes, whose income growth has been slower than that of more affluent households. Indeed, real household income only rose by 10 percent from 2012 to 2022 for house holds in the lowest income quartile, compared to 16 percent among households in the highest income quartile, according to the CPS. As a result, income gaps widened. As of 2022, those in the bottom quartile had a median income of $20,000 as compared to for those in the highest quartile. These income gaps are exacerbated by the recent resumption of federal student loan payments, which were paused from March 2020 to September 2023 in response to the pandemic. An estimated 28 million households carried student debt in 2022, according to the most recent Survey of Consumer Finances, including about 13 million households with annual incomes under $75,000. The added stress of these loans was made clear when only 60 percent of borrowers with payments due made their first student loan payment on time after the pause ended, according to the US Department of Education. Widening Wealth Disparities Between Owners and Renters Median real household wealth rose between 2019 and 2022, the last years for which data are available. For many households, the combination of Economic Impact Payments, paused student loan payments, and reduced consumer spending early in the pandemic meaningfully increased household savings. However, not all households experienced these gains equally, with homeowners’ wealth increasing significantly more than renters’, due to skyrocketing home equity. The opportunity for homeowners to build equity results in large wealth disparities with renters. In 2019, median renter household wealth was $7,300, compared to for homeowners. That gulf widened dramati cally between 2019 and 2022, during which the median net wealth for renter households and homeowners rose by $3,100 and respectively, after adjusting for inflation. Consequently, median renter household wealth was less than 3 percent of median homeowner wealth, at $10,400 compared to .

[Assistant] Furthermore, according to researchers at the Federal Reserve Bank of San Francisco, the nationwide aggre gate cash savings that ballooned to more than $2 trillion between 2020 and 2021 will likely be depleted by mid-2024. This will leave many households, especially those that rent, with even less of a financial buffer.


[User] In the longer term, however, younger generations may be unable to form households fast enough to outpace baby boomers’ rising mortality rates. Instead, the decline in the natural population growth rate may accelerate, as projected by both the CBO and the Another Race Black Hispanic White Race/Ethnicity Notes: White, Black, and another race householders are non-Hispanic. Hispanic householders may be of any race. Another race householders are Asian, multiracial, or of another race. Source: JCHS tabulations of Federal Reserve Board, Surveys of Consumer Finances. 04 H O M E O W N E R S H I P High home prices and interest rates have raised the costs of homebuying to historic heights, pricing out millions of potential first-time buyers, slowing homeownership growth, and exacerbating racial home ownership gaps. While the average homeowner is enjoying significant equity gains and a below-market mortgage interest rate, cost burdens are rising for owners with lower incomes in the face of higher insur ance premiums and property taxes. For homeownership to remain a viable and beneficial choice for US households, the affordability, accessibility, and sustainability of homeownership must be improved for both current and future homeowners. Median Home Sales Price Monthly Payment on Median-Priced Home Mortgage Interest Rate Notes: Payments and prices are inflation-adjusted using the CPI-U for All Items Less Shelter and a four-quarter rolling average. Monthly payments assume a mortgage with a 3.5% downpayment on a 30-year fixed-rate loan with zero points and 0.55% mortgage insurance, 0.35% property insurance, and 1.15% property tax rates. Source: JCHS tabulations of Freddie Mac, Primary Mortgage Market Surveys; National Association of Realtors, Existing Home Sales. Consequently, homeownership is less affordable than it has been in decades. In March 2024, the median monthly mortgage principal and interest payment on home purchase mortgage applications rose $108 year over year to $2,201, according to the MBA Purchase Applications Payment Index, and is now up more than $852 over the last three years. Accounting for prop erty taxes and insurance pushes these payments even higher. As monthly payments have increased, so, too, has the income required to afford them. In the first quarter of 2024, a household needed to earn a whopping annually to afford the median-priced home in the US, up from an inflation-adjusted $82,000 in the first quarter of 2021, assuming a loan with a down payment of 3.5 percent and a 31 percent housing- payment-to-income ratio. In a growing number of metro areas, a buyer must have an annual income of more than to afford the median-priced home, including nearly half (48 percent) of the 179 markets covered by NAR in the first quarter of 2024, up from 40 percent a year earlier and just 11 percent of metros in the first quarter of 2021. Higher home prices also necessitate larger down payments, further limiting access to homeowner ship. As of the first quarter of 2024, a buyer of the US median-priced home of would need to have $25,300 in cash to cover a 3.5 percent downpayment and 3 percent closing costs. Just 12 percent of renters can hit that benchmark, according to the most recent Survey of Consumer Finances. In the event a buyer could not qualify for a low-downpayment loan, the required cash would be $89,600 for a 20 percent downpayment and 3 percent closing costs on the same property. Assuming the buyer earns the national median household income of $74,800, they would need to save more than a full year’s salary to amass sufficient cash. Millions of First-Time Homebuyers Priced Out of Market Faced with rising homeownership costs, fewer renters can afford to transition to homeownership. Just 6.6 million renter households (14.5 percent) had suffi cient income to afford the US median-priced home in the first quarter of 2024, down from 7.7 million in early 2023 and 10.2 million in 2022, according to Center tabulations of the American Community Survey and assuming a 31 percent housing-payment-to-income ratio. If a cash requirement of a 3.5 percent down- payment and 3 percent closing costs is added, the eligible population plummets to just 2.6 million renter households (5.8 percent), according to Center tabu lations of data from the Survey of Consumer Finances. This increasing unaffordability is evident in the declining purchases by first-time homebuyers. According to the Urban Institute, the number of first- lien mortgages originated to first-time homebuyers dropped by 17 percent in 2023 after falling 22 percent in 2022, translating to fewer mortgages than two years prior. pull down growth of the US homeownership rate to just 0.1 percentage points in 2023. However, last year’s annual increase was the smallest since, according to the Housing Vacancy Survey. The US homeownership rate dropped slightly year over year in the first quarter of 2024, suggesting an end to the multiyear streak of annual increases. Additionally, the number of homes for sale remains lower than at any time before the pandemic, further complicating homebuyers’ efforts. According to the 2023 NAR Profile of Home Buyers and Sellers, successful buyers reported that finding a home was the most diffi cult step in the process, more challenging even than obtaining a mortgage or saving for the downpayment. Homeowner Households Homeownership Rate (Right scale) Note: Estimates for 2020 are omitted due to data collection issues experienced during the pandemic. Source: JCHS tabulations of US Census Bureau, Housing Vacancy Surveys. Financing is another barrier that disproportionately affects people of color. Mortgage loan denial rates are much higher for Black (16.8 percent) and Hispanic (12.0 percent) applicants, in contrast to their Asian (9.6 percent) and white (6.7 percent) counterparts, according to the latest Home Mortgage Disclosure Act report. A January 2024 report by the Federal Reserve Bank of Minneapolis found that Black applicants are more likely than their white counterparts to be denied a loan because of their credit history. Furthermore, research published in 2021 by the Brookings Institution links such credit and financing challenges to neighbor -hood residential segregation by race, whereby many households of color live in underserved neighbor hoods with less access to banking institutions and other financial vehicles for establishing creditwor thiness. Each of these barriers contributes to racial differences in homeownership and the associated wealth accumulation. Race/Ethnicity White Black Hispanic Another Race Black-White Hispanic-White Another Race-White Notes: White, Black, and another race householders are non-Hispanic. Hispanic householders may be of any race. Another race householders are Asian, multiracial, or of another race. Rate gaps shown in right panel are from the first quarter of each year. Estimates for 2020 are omitted due to data collection issues experienced during the pandemic. Source: JCHS tabulations of US Census Bureau, Housing Vacancy Surveys. According to CoreLogic, the average mortgaged homeowner has gained in home equity since 2020, including $24,000 in just the past year, and now possesses in home equity as of the fourth quarter of 2023. Aggregate Mortgage Debt Aggregate Home Equity Note: Homeowner equity and mortgage debt are adjusted for inflation using the CPI-U for All Items Less Shelter. Source: JCHS tabulations of Federal Reserve Board, Financial Accounts of the United States. Black homeowners have experienced above- average increases in home values since the pandemic, according to an analysis by Zillow. Still, the average value of a home owned by a Black or Hispanic house hold in January 2023 was 17 or 12 percent lower, respec tively, than that of a white household, clear evidence of the consequences of both racial segregation and the entrenched biases against neighborhoods of color that underpin property valuations. In addition to equity gains, the record-low interest rates available during the pandemic have benefited many owners. As of the fourth quarter of 2023, more than half (58 percent) of all homeowners with a mort gage enjoy rates under 4.0 percent, according to the Federal Housing Finance Agency’s National Mortgage Database. Having locked in these low fixed rates, US homeowners are, on average, paying less for mort gage debt as a percentage of disposable income than at any time since such data collection began in 1980. Increasing Number of Homeowners Are Cost Burdened Although many homeowners are in favorable financial positions, many others face a growing affordability challenge, especially those with lower incomes. Nearly 20 million homeowners as of last measure in 2022 are cost burdened, spending more than 30 percent of income on housing and utilities. This includes 9 million who are severely burdened, spending more than 50 percent of household income on these costs. Concerningly, homeowner cost-burden rates are rising. Between 2019 and 2022, the burden rate grew from 21 percent to 23 percent of homeowners, an increase of roughly 3 million households. Increasing property insurance premiums and taxes have likely made this worse. According to Policygenius, home insurance premiums increased an average of 21 percent between May 2022 and May 2023, with statewide increases aver aging a shocking 35 percent (nearly $500) in Florida. Single-family property taxes also grew an average of 4.1 percent in 2023 to $4,062, according to the ATTOM 2023 property tax analysis. Cost burdens are concentrated among disadvantaged and vulnerable populations, including homeowners of color and those with low incomes. Specifically, 30.3 percent of Black, 28.5 percent of Hispanic, and 25.8 percent of Asian homeowners are cost burdened, as compared to 21.3 percent of their white counterparts. Single-parent homeowners also have high burden rates (36.1 percent). And adults age 65 and over, 27.4 percent of whom are burdened, constitute a large JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY THE STATE OF THE NATION’S HOUSING and rapidly growing share of homeowners with cost burdens, up by 1.4 million since 2019 to 7.6 million. Still, burdens are most prevalent and growing fastest among homeowners with low incomes, with fully half of the growth in owner cost burdens since 2019 among households with annual incomes under $30,000. Though this population constitutes just 14 percent of homeowners, they represent 42 percent of those with burdens and an alarming 66 percent of the severely burdened. The growth in burdens has been espe cially swift among older adult homeowners with low incomes, up from 30 percent in 2001 to 45 percent in 2022, and is particularly high among those with mort gages. A shocking 95 percent of older adult home owners with low incomes and mortgages are cost burdened, dramatically higher than the 56 percent of their counterparts who own their homes outright and the 74 percent of those who rent. These homeowners are feeling the financial strain. The median low-income homeowner has just $627 per month available after paying for housing and util ities, while those with cost burdens have just $216 per month, forcing tough choices between housing and other basic needs. According to the 2022 Consumer Expenditure Survey, homeowners with low incomes and severe burdens spent half as much on food and healthcare and contributed less than half as much to savings and retirement as those who were unburdened. Household Income Under and Over All Homeowner Households Severely Burdened Moderately Burdened Notes: Household incomes are adjusted for inflation using the CPI-U for All Items. Moderately (severely) cost-burdened households spend more than 30% (more than 50%) of income on housing and utilities. Households with zero or negative income are assumed to have severe burdens, while households that are not required to pay rent are assumed to be unburdened. Source: JCHS tabulations of US Census Bureau, American Community Survey 1-Year Estimates.

[Assistant] The Outlook In the near term, interest rates will likely remain elevated, disincentivizing homeowners with below- market mortgage rates to move and continuing the constrained supply of homes for sale. Consequently, the high cost of homebuying will likely persist and possibly even increase further, underscoring the need for new construction to help meet demand. Smaller homes, townhouses, and modular and manufactured housing would be especially helpful in serving poten tial buyers with more modest incomes who are priced out of the current market. Downpayment assistance, interest rate buydowns, and other targeted programs that can help to increase homeownership rates among households of color are also critical to narrowing the large racial homeownership disparities.


[User] 05 R E N TA L H O U S I N G Rental affordability is the worst on record. The number of renters with cost burdens has hit an all-time high, and the stock of low-rent units has continued to fall.

[Assistant] Though a rush of new supply has helped to temper rent growth and increase vacancies, the slowdown will likely be short-lived. High interest rates and rising insurance and operating costs are weakening property performance and hindering new development. Renter Cost Burdens Reach New High The number of cost-burdened renter households reached a record-breaking 22.4 million at last measure in 2022, an increase of 2.0 million households since 2019. The number of severely cost-burdened renter households also hit a record high at 12.1 million, fully 1.5 million households above pre-pandemic levels. This rise pushed the share of cost-burdened renter house holds to an alarming 50 percent in 2022, an increase of 3.2 percentage points since 2019 and 9.0 percentage points since 2001. Among renter households earning $30,000 to $44,999 per year, 67 percent were Notes: Household incomes are adjusted for inflation using the CPI-U for All Items. Moderately (severely) cost-burdened households spend more than 30% (more than 50%) of income on housing and utilities. Source: JCHS tabulations of US Census Bureau, American Community Survey 1-Year Estimates. cost burdened in 2022, an increase of 2.6 percentage points from 2019 and 15.1 percentage points since 2001. Burden rates also rose among renter households with annual incomes under $30,000, which consistently have the highest cost-burden rates. In percent of these households were cost burdened, an increase of 1.5 percentage points from 2019, including 65 percent who were severely burdened. Long-standing discrimination in housing, employment, and education has contributed to disproportionately high cost-burden rates for renter households headed by a Black, Hispanic, or multiracial person. In 2022, more than half of Black (57 percent), Hispanic (54 percent), and multiracial (50 percent) renter households were cost burdened, as compared to white (45 percent), Asian (44 percent), and Native American (44 percent) households. Even among renters with incomes under $30,000, households headed by a Hispanic (87 percent), Asian (86 percent), or Black person (85 percent) were more likely to be cost burdened than those headed by a white person (80 percent). Because rents have been increasing faster than incomes for years, renters have less money to cover non-housing expenses. While median rents have risen 21 percent in inflation-adjusted terms since 2001, median renter household incomes have risen just 2 percent. Consequently, renters’ median residual income—the amount of money available each month after paying for rent and utilities—declined 4 percent since 2001 to $2,600 in 2022. Renters with lower incomes have been particularly stricken by rising housing costs. Residual incomes for those making less than $30,000 annually dropped to an all-time low of $310 in percent lower than in 2001. Among these renters, those with cost burdens had a scant $170 in residual income. High housing costs are forcing financially vulner able renters to reduce their spending in areas critical to well-being. Center tabulations of the Consumer Expenditure Survey indicate that severely cost- burdened renter households in the lowest expenditure quartile (a proxy for low incomes) spent 39 percent less on food and 42 percent less on healthcare than their unburdened counterparts in 2022. Renters may also make other trade-offs to reduce housing costs, including relocating to an older or substandard unit or a different neighborhood, or opting for overcrowded living arrangements or longer commutes. These and other such choices may further threaten an already vulnerable household’s health, financial stability, and economic mobility. Shortage of Low-Rent Units Grows Over the past decade, the supply of low-rent stock has continued to decline, leaving lower-income house holds even fewer housing options they can afford. Between 2012 and 2022, the nation lost 2.1 million units with rents under $600 when adjusted for inflation, the maximum amount affordable to a household earning $24,000 annually when applying the 30 percent of income standard. Meanwhile, the supply of higher-rent units increased. The number of units with rents between $1,000 and $1,399 increased by while those with rents between $1,400 and $1,999 grew by 4.3 million, and those with rents of $2,000 or more increased by 4.1 million. These changes have shifted the distribution of rents upward. In 2022, just 16 percent of units had rents below $600, down from 22 percent of the rental stock in 2012. Meanwhile, the share of units renting for $2,000 or more increased from 7 percent to 16 percent. The national rental vacancy rate rose to 6.6 percent in the first quarter of 2024, according to the Housing Vacancy Survey, up from the pandemic low of 5.6 percent in the second quarter of 2022 and approaching the 6.9 percent rate averaged in the five years leading up to the pandemic. Vacancies have also rebounded in the professionally managed apartment sector: rates climbed steadily through 2022 and 2023, reaching 5.9 percent in the first quarter of 2024, over 1 percentage point above the pre-pandemic rate of 4.8 percent averaged between 2015 and 2019, according to Real Page. As a result, rent growth slowed to 0.2 percent year over year in the first quarter of 2024 after reaching a record high of more than 15 percent annually in early 2022. As supply has surged, new units are sitting vacant longer. According to the Survey of Market Absorp tion, 52 percent of new units were leased within three months of completion in the third quarter of 2023, down from a high of 75 percent in the third quarter of 2021. This indicates a slowdown in the market’s ability to absorb the rush of new units. According to the National Council of Real Estate Investment Fiduciaries (NCREIF), net operating incomes for apartments grew by 2.8 percent annu ally in the first quarter of 2024. This was a substantial deceleration from the high of 24.8 percent in late 2021 and lower than the 5.4 percent annual rate averaged in the five years preceding the pandemic.


[User] And, despite an abundance of new apartments, high rents have left more people than ever cost burdened, and have contributed to a sharp rise in homelessness. Meanwhile, unprecedented destruction from wildfires has further highlighted the growing threat to the housing stock from climate-related disasters. Home Prices Grow Along with Inventories In the for-sale market, home prices grew again over the previous year across most of the country. Prices increased in all four regions and in 88 of the top 100 largest metro areas. Consequently, the US median existing single- family home price hit a new high of in 2024, according to the National Association of Realtors (NAR). This is a shocking five times the median house hold income and significantly above the price-to- income ratio of 3 that has traditionally been consid ered affordable. As prices rose, existing home sales dropped to a 30-year low. Just 4.06 million home sales were recorded last year, the fewest since 1995. Contributing to the low rate of sales is the large share of existing homeowners with below-market mortgage rates who are disincen tivized from selling in the higher-rate environment. The slowdown in home sales has increased the for-sale inventory, which could help to moderate the rate of appreciation in prices. Although inventories remain low, the number of homes for sale rose 20 percent in March 2025. Inventories were up in 98 of the nation’s 100 largest metros in early 2025, with some of the largest gains in metros that saw slower home price growth over the year. Though existing home sales remained flat, new home sales increased by 3 percent last year. The growth of new home sales reflected rising construction levels. Contending with the same high costs and affordability pressures as existing home sellers, many builders responded by producing homes that were smaller or had fewer amenities. The median size of a new single-family home declined for the third consecutive year in 2024, to 2,150 square feet. As a result of these competitive adjustments, new construction consti tuted the largest share of all home sales since percent). Additionally, the median sales price of new single-family homes fell for the second straight year to just $7,800 above that of existing single- family homes in 2024. Many builders also cut prices or offered mortgage rate buydowns to facilitate sales. Going forward, however, these sorts of adjustments and incentives could be overshadowed by increases in interest rates or construction costs. Applying the standard lender affordability ratio of 31 percent debt to income, a buyer would need an annual income of at least to afford such a payment. As of 2023, only 6 million of the nation’s nearly 46 million renters can meet this benchmark, according to the American Community Survey (ACS). While home prices vary by market, a buyer still needs to earn at least in more than half (53 percent) of all metro areas to afford the median-priced home, up from 11 percent in 2021. Access to homeownership is further restricted by the large sums needed for a downpayment, which have grown in step with rising home prices. Inability to afford a downpayment was the primary reason households continued to rent, according to a 2024 report by the Federal Reserve. Last year, a buyer would need to possess $26,800 in cash to cover both the closing costs and a 3.5 percent downpayment on the median-priced home, or $95,000 in cash for closing costs and a 20 percent downpayment. It is perhaps, then, not surprising that first-time homebuyers were older and more affluent in 2024. Nevertheless, they increasingly relied on friends and family for help covering the downpayment, according to NAR’s 2025 survey of homebuyers and sellers. In this environment, annual growth in the number of homeowner households dropped from 1.25 million in 2023 to just last year. The US homeownership rate fell in 2024 for the first time in eight years to 65.6 percent and continued downward to 65.1 percent in the first quarter of 2025. The largest decline occurred among households under the age of 35, dropping a full 1.4 percentage points in 2024. This downturn cut JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY THE STATE OF THE NATION’S HOUSING Median Single-Family Sales Price Mortgage Interest Rate Monthly Mortgage Payment Notes: Payments and prices are adjusted for inflation using the CPI-U for All Items Less Shelter and a four-quarter rolling average. Monthly mortgage payments are on the median-priced home and assume a 3.5% downpayment on a 30-year fixed-rate loan and 0.55% mortgage insurance, 0.35% property insurance, and 1.15% property tax rates. Source: JCHS tabulations of Freddie Mac, Primary Mortgage Market Surveys; National Association of Realtors (NAR), Existing Home Sales. Rental Demand Remains Strong as Supply Grows As fewer households have been able to become homeowners, the renter population has grown, espe cially over the past two years. After increasing by an average of per year between 2019 and 2022, the number of renter households jumped by in 2023 and then another in 2024, according to the Census Bureau’s Housing Vacancy Survey. While new construction has grown the rental supply overall, it has failed to increase the stock of low-rent units, which has dwindled over time. Between 2013 and 2023, the number of units renting for less than $1,000 per month after adjusting for inflation fell by more than 30 percent, from 24.8 million to 17.2 million. Instead, new construction focused primarily on higher-rent units, which helped to nearly triple the stock that rents for $2,000 or more, from 3.6 million to 9.1 million during the same period. Burdens are rising most rapidly for homeowners with lower incomes and for the growing number of older homeowners. In 2023, a record-high 74.2 percent of the 10.9 million homeowners with incomes below $30,000 were cost burdened, up from 68.7 percent in 2019. The rising cost of homeownership is partially explained by steep increases in insurance premiums and prop erty taxes. Home insurance premiums jumped 57 percent from 2019 to 2024, according to Freddie Mac. according to the ICE Mortgage Monitor, or an annual payment of more than $11,000 on the metro’s median- priced home (of . Property taxes also increased an average of 12 percent between 2021 and 2023, lifting the average annual tax bill to $4,380, according to the ACS. Some state and local governments have implemented tax abatement programs, typically targeted to low- income and older adult households. However, discounts are often limited, as property taxes are one of the few sources of local revenue. Cost Burdens Hit Record Number of Renters For the third consecutive year, the number of cost- burdened renters reached another record high in 2023 at 22.6 million renters (50 percent). This includes more than 12.1 million (27 percent) who are severely burdened, spending more than half of their income on housing and utilities. As rental unaffordability has worsened, burdens have become more pervasive across the country. Between 2019 and 2023, the share of renters with cost burdens increased in states and in 89 of the nation’s 100 largest metro areas. More than half of all renters were burdened in 13 states and in 50 of the 100 largest metro areas. While households with lower incomes constitute the bulk of burdened renters, the strain is creeping up the income ladder. Fully 83 percent of renters earning under $30,000 were cost burdened in the most recent data, including an astounding 67 percent with severe burdens. But burden rates were also over 70 percent for renters earning $30,000 to $44,999, an increase of 15.0 percentage points since 2001. During the same period, burden rates doubled to more than 45 percent for renters earning $45,000 to $74,999. As housing costs have grown, many households have less money available to cover other neces sities. In 2023, renters with incomes below $30,000 had a median of just $250 per month left over after paying for housing. Many are forced to make difficult spending trade-offs between crucial needs, including healthcare, food, and retirement savings, according to the 2023 Consumer Expenditure Survey. Demand Set to Slow Net household growth decelerated for the second year in a row in 2024, and the underlying drivers suggest an extended slowdown is on the horizon. Last year, the US added just 1.56 million households, on the heels of 1.61 million in 2023. Growth has further slowed to 1.26 million households annually as of the first quarter of 2025. By contrast, the nation averaged 1.93 million annually between 2019 and 2022. The immigration surge ended in early 2025, removing the largest source of population growth and, in turn, the largest driver of new housing demand. At the same time, demographics are becoming less favorable for further growth. Baby boomers will start to turn 80 in 2026 and will soon experience mortality rates that overshadow new household formations. Proposed reductions in federal resources for crucial housing supports would leave even more house holds with severe housing problems. Rental assis tance programs like Housing Choice Vouchers, public housing, and Low-Income Housing Tax Credits provide lifelines for roughly 5.1 million households. These programs, which assist vulner able households and expand the supply of affordable housing, are already underfunded.

[Assistant] New financing mechanisms are also increasingly important. Last year, voters approved more than $640 million in state and local affordable housing bonds. Eight places also passed ballot initiatives to levy lodging taxes in support of affordable housing, and three others increased or extended real estate transfer taxes. More than 800 state and local housing trust funds are also available to finance affordable housing. But flexible federal resources are often needed to buttress these efforts. States and localities will be far less effective in addressing the affordability crisis if federal funding declines.