Housing Supply Deficit Approaches 4 Million by 2024: New Report

March 12, 2025 TruthUSA

Real estate developers are grappling with elevated material costs, a shortage of labor, credit challenges, and various other obstacles.

The United States is still contending with a notable shortage of homes for prospective buyers, with the housing supply deficit nearing four million units as of last year, based on a recent research report from the real estate listing platform Realtor.

“In 2024, new-home construction exceeded household formations for the first time since 2016. However, the housing gap continues to linger, now at 3.8 million,” the company stated in a March 10 report. This marks the third-largest annual supply gap observed since 2012. “At the current pace of construction in 2024 relative to household formations and pent-up demand, it would require 7.5 years to bridge the housing deficit.”

Realtors have attributed the ongoing housing market supply crisis to real estate zoning regulations and other restrictions that hinder new construction efforts.

For many potential homebuyers, particularly younger households earning “a typical early- to mid-career salary,” purchasing a home has become increasingly challenging. Consequently, there has been a decline in the rate of household formation among individuals aged 18-44 over the past decade.

In the previous year, over 1.6 million homes were completed, representing the highest production level in nearly two decades. However, the overall inventory of homes available for sale remains below pre-pandemic levels. Simultaneously, worries about affordability have kept many buyers out of the market.

“Constructing new homes is beneficial for the housing market and crucial for young households struggling to establish themselves amidst soaring housing costs. An increase in home supply could lead to lower prices and, in turn, higher home sales.”

“However, builders encounter obstacles including zoning and permitting regulations along with surging material costs, making the construction of affordable homes particularly difficult,” the report noted. “Increasing the availability of affordable housing, especially in regions with strong job growth and high demand, is crucial for making homeownership attainable for Americans.”

Recently, Vice President JD Vance asserted that high rates of immigration in recent years contribute to the inflated housing prices plaguing the United States.

“Over the last four years, many individuals have entered the country illegally—and we must address this if we hope to significantly reduce housing costs,” he remarked during a March 10 address.

“Across the globe, there is a consistent correlation between a significant rise in immigration and a substantial increase in housing costs.”

Construction Industry Challenges

Earlier this month, the National Association of Homebuilders (NAHB) informed Congress that supply-side challenges are negatively impacting the housing market.

“The United States is facing an acute housing affordability crisis, with nearly 77 percent of households unable to afford a median-priced new home,” testified NAHB Chairman Buddy Hughes.

The tightening availability of credit for construction loans presents a significant hurdle for homebuilders. Furthermore, the construction industry is in the midst of a labor shortage, with over 200,000 job openings still unfilled, he stated.

Since December 2020, construction costs have risen by 34 percent, leading to increased rents and higher home prices. Stricter land-use and zoning regulations have resulted in a limited number of available lots.

Hughes pointed out that regulatory costs have escalated to such an extent that they now account for approximately a quarter of the purchase price of new single-family homes.

He urged Congress to maintain and enhance initiatives such as the Low-Income Housing Tax Credit, support workforce development programs in construction, increase lumber supply, and manage escalating regulatory costs.

The Trump administration took measures to reduce burdensome regulations within the housing sector.

At the end of last month, the U.S. Department of Housing and Urban Development (HUD) declared it was repealing the Affirmatively Furthering Fair Housing (AFFH) rule, which the department cited as a source of affordability challenges and bureaucratic red tape.

Originally implemented by the Obama administration, the rule was eliminated by the first Trump administration and reinstated by the Biden administration.

HUD stated that the AFFH regulation imposed excessive requirements on local officials, including answering 92 questions on matters concerning disparities in housing access and reporting on issues like environmental health risks that had little relevance to affordable housing. It mandated that HUD fund recipients ensure their practices did not contribute to racial segregation.

HUD argued that this regulation led to a “decrease in the availability of affordable housing” and drove up costs.

With the abolishment of the AFFH rule, local jurisdictions will “no longer be obligated to complete burdensome paperwork or exhaust their budgets to conform to the extreme and restrictive demands of the federal government,” stated HUD Secretary Scott Turner.

“Local and state authorities have a far better understanding of their communities’ needs than bureaucrats in Washington, D.C. Repealing this rule restores faith in local communities and property owners while safeguarding the integrity of America’s suburbs and neighborhoods.”

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