Affordable Housing: Not Just a Supply Problem
The rate of household formation over five decades has vastly increased demand
Here in my town of Cambridge, Mass., one of the most contentious issues for voters of City Council candidates this November is affordable housing. As you no doubt are aware, we are not alone in addressing this need.
The simple, high-level economic reason for a dearth of housing considered affordable by lower and some middle-class families is that there are more households looking for shelter than there are shelters. In short, it’s the basics: demand exceeds supply. In a market economy, that drives up prices. In a non-market economy, allocation of housing must be some other means, such as by chance —lottery, bribes, or by government edict, such as forcing two or three families to share a space or some other imposed mechanism.
In our economy, there are at least a half dozen factors that have contributed to the lack of supply relative to demand. These include zoning and land use restrictions, NIMBYism1, high construction costs, limited buildable land, environmental concerns, and changing economic variables (interest rates, banking oversight), among others. The degree of salience of each varies depending on locality.2
Household Formation Exploded
My contribution to understanding the issue is a factor that I have infrequently seen as part of the discussion: the growth in the number of households that far exceeds the growth in population over the past six decades. Follow along with me. First I’ll supply some data, then contribute some commentary. Add your own take in the comments.
According to the Census Bureau, a household is “all the persons who occupy a housing unit (house or apartment), whether they are related to each other or not.” So one household = one dwelling unit.
Between 1960 and 2022 the population of the U.S. grew 86%, to 333 million. However, the number of households grew by 148%. In 1960, single parents (90% women) with one or more children under 18 accounted for 5.2% of those households. This proportion had more the doubled, to 12.6% by 2022 (down to 75% women).
What analysis grows from this exercise? Traditionally, a majority of households included children. In 1960, the average household size was 3.4, and 85.4% of households included children. By 2022, the average household was down to 2.5 people and only 64.3% of households included children. In short, relative to the population, there has been a disproportionately greater household formation. By definition, each household requires a dwelling unit. Hence, disproportionately greater demand.
Much of this increase in households is the result of changing social norms. Again, traditionally, children lived in their parent’s homes until they married, which in 1960 was about 20 for women and 23 for men. By 2022, that had risen to 30 for men and 28 for women.
And a large percentage of those still unmarried young adults are out forming households, with roommates or solo. Indeed, in 1960, 13% of households consisted of a single person. Today, it exceeds more than twice that proportion, 28%. Hence, more demand for dwelling units.
Moreover, the number of single-parent households nearly quintupled between 1960 and 2022 and more than doubled proportionally to the total number of households. A single-parent household may be formed when a couple —married or otherwise—split up or divorce. One household becomes two. But it also arises from women who choose to have a child even in the absence of a legal or de facto spouse. Into the 1960s there was considerable stigma for an unmarried woman to have a child. Pregnant women who couldn’t find or afford or accept an illegal abortion would be “shipped off to a maternity home.” Only 5% of births were to unmarried women in 1960.
Changed Social Attitudes
Social mores have changed dramatically. Roe v. Wade made it possible to end unwanted pregnancies for those who chose to do so. Improved methods of birth control, especially the pill, gave women further control. At the same time, social norms have become more tolerant. Today, about 40% of children are born to unmarried women. In some cases, they are part of a family of a committed couple. But in other cases, the children are borne by women who want to be mothers even if there is no spouse or committed other.
This substantial increase in single parent households—for whatever reasons— is another factor in changing the demand for housing. At the same time, a household with a single person with one or more children has a different economic base than a traditional couple. What’s affordable to a single parent, who may also need to pay for child care, would be different than a household with two parents, with two incomes or one income and a stay-at-home parent, thus not needing the expense of outside child care.
What is “affordable” varies by definition as well as by the income levels of various regions of the country. For example, in Cambridge, Mass., considered a high cost and relatively high-income city
Housing is considered "affordable" when the tenant or homeowner pays no more than 30% of their gross income for housing costs. Affordable housing in Cambridge serves low-, moderate-, and middle-income households, with most programs targeted to households earning less than 80% of Area Median Income adjusted for household size.3
The bottom line is that the need for “affordable” housing is not just a matter of economics and regulation, which affect the supply. These are challenging enough to negotiate. Factor in that our dynamic social and cultural values have helped exacerbate the “crisis” by creating a demand for housing at a rate far greater than the growth in population would have suggested.
On the one hand, this all may help explain how we got here. It doesn’t suggest a painless solution. We certainly cannot undo the forces that have created the explosion in household growth and needs. On the other hand, there could be strategies that could tamp down demand, through tax policy or zoning requirements, for example. Otherwise, the only remediation is build, build, build.
Not In My Back Yard-ism
I personally just spent three months and multiple phone calls and visits for a city permit to replace some drywall damaged by a burst water pipe.
For the Boston area, the median income for a family of three is $134,400, so the sweet spot for programs is for those under 80% of the median, or $107,500. This cap varies by family size.
A good and important post. Liberals, like me, need to rethink our fondness for regulation and pay more attention to the consequences of over-regulation. In too many instance, such as with affordable housing, the understandable desire to protect citizens from unnecessary harm has had pernicious consequences for vulnerable groups that liberals want to help. Striking the proper balance is not going to be easy. But we need to start thinking differently about the scope of regulation if we want to address the affordable housing crisis, along with a range of other socioeconomic issues.
I loved the numbers. In Portland, there is great concern about homeless, but not a strong interest in making tough decisions. Examples:
-In the early 40's Kaiser built 30,000 homes in 6 months...because we needed to.
-There are way more empty bedrooms than homeless people. We choose not to fill them. (In the war in the Balkans in the 90's, people were required to house the homeless in some areas.)
-Some areas approve low-income housing construction permits in 1-3 weeks. In Portland, it can require a year. Homelessness isn't important enough to streamline the process.
-Several years ago, Greece put up tent housing for something like 6000 immigrants in a week. Portland takes months to construct facilities for many fewer people.
Your numbers help explain how the solution will only become more difficult. And, they suggest that there should be lots of thinking beyond housing. There are lots of implications as we think through the implications of the demographics on our employees and customers.