After imploding in 2008, the U.S. housing market has had a slow, decade-long recovery, with both home ownership and housing construction going up. But a new Harvard University study released Tuesday shows "persistently weak" production of new houses and apartments is barely meeting demand, driving up prices beyond the reach of many Americans.
At the same time, low vacancy rates in the rental market, combined with new apartments built largely for upscale tenants, is making housing even more expensive for the poor, according to the report.
That dynamic, advocates say, is forcing low-income households to choose what to pay for: food, healthcare or rent.
"People are having to choose between their housing and their health," says Dr. Thea James, vice president of mission and associate chief medical officer of Boston Medical Center. "There's a huge difference" in health outcomes between people who can afford quality housing and those who can't, she says.
New construction "was still depressed relative to demand, with new addition to supply just keeping pace with the number of new households" entering the market, according to the report, "The State of the Nation's Housing," produced by Harvard's Joint Center for Housing Studies. As a result, the nationwide vacancy rate for housing fell to 4.4 percent, the lowest rate since 1994.
A low vacancy rate among renters means less turnover in rental housing; that translates into more competition for available rental homes, which means rents stay high.
Meanwhile, mostly high-end houses and apartment buildings are being built for the new-home market, signals that housing prices probably will keep rising for the poor, many of whom pay more than 50% of their monthly income in rent, according to the study. Most economists say housing costs ideally should not consume more than 30% of household income.
Twin factors are pushing up prices: Real estate is selling at a premium, particularly in desirable metro areas like San Francisco, Seattle and New York, and municipal red tape.
"These constraints, largely imposed at the local level, raise costs and limit the number of homes that can be built in places where demand is highest," says Chris Herbert, managing director of the JCHS.
The double whammy of expensive real estate and bureaucratic hurdles nudges developers into building pricier homes in places where higher prices give them a bigger return on their investments, according to the report.
The big picture of housing in the U.S. is more of a mosaic, with location being a key variable, according to the report.
Nationwide, the number of homeowners spiked from 2017 to 2018, "even as the ratio of median home price to median household income rose from a low of 3.3 in 2011 to 4.1 in 2018, a sign of deteriorating affordability," according to a JCHS statement accompanying the report. But "conditions for would-be buyers vary widely across the country," with home values "more than five times greater than incomes in roughly one in seven metro areas," mostly in the West.
Growth in homeownership meant fewer renters in 2018, the second consecutive year of contraction and a big change from the previous 12 years. Still, rents are rising at twice the rate of overall inflation, according to the statement.
But developers' strategy of building new apartments for high-income tenants has left low-income renters out in the cold: The number of units renting for under $800 plunged by one million in 2017, bringing the total loss from 2011–2017 to four million, according to the report.
That's bad news for advocates like James, the Boston physician, who is also an associate professor of emergency medicine at Boston University School of Medicine.
She says the lack of affordable housing for low-income residents has a ripple effect, perpetuating conditions like homelessness or forcing people to live in substandard housing – buildings infested with vermin or asthma-triggering mold, located in unsafe neighborhoods – that perpetuate poor health outcomes.
"It makes the job of what we're trying to do difficult: keeping people well," says James. As physicians focused on housing and public health, "we can correct (a patient's) disease, but then we send them right back out into what's causing it."