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Washington, D.C. — From 2000 to 2015, the U.S. fell 7.3 million units short of meeting housing demand, according to new research from the Up for Growth National Coalition, ECONorthwest, and Holland Government Affairs. A new report, Housing Underproduction in the U.S., details the depth and breadth of the housing crisis by focusing on the 22 states and Washington, D.C., that failed to meet their historic housing production demand. While California accounts for over 45 percent of the total shortage at nearly 3.4 million units, states in nearly every corner of the country underproduced housing, representing over 5 percent of total housing stock.

In addition to increasing rents and home prices at an unsustainable level, failure to meet housing demand has other negative societal impacts, including suppressing national GDP, generating negative environmental impacts, and pushing individuals and families with limited incomes farther away from job centers.

“The housing shortage is far more severe than originally believed, and much more widespread,” said Clyde Holland, Founder and CEO of Holland Partner Group and Up for Growth Executive Chairman. “From California to Maine, the supply of housing is simply not matching its growing demand. Not building enough new housing pushes rents up, forces quality of life down, and is a significant drag on the economy. As this research clearly shows, these trends and the barriers to building market-rate and affordable housing are unsustainable. To achieve affordable, sustainable, and vibrant communities, we need a new approach to housing.”

The report goes beyond simply identifying the depth of the housing shortage. It examines three different approaches to meeting demand:

  • more of the same,
  • intensifying urban density, and
  • smart growth.

More of the same assigns new housing based on existing patterns that favor low-density, suburban sprawl. Intensifying urban density assigns additional housing units through a top down approach, filling in the densest existing block groups first to provide a comparative, if infeasible, baseline representing the extreme end of dense development. Smart growth would favor new housing based on a formula of existing density, distance to transit stops, and the share of commuters in a given area who drive their own vehicles to work.

The research proved the significant benefits in the smart growth scenario. For example, using only 25 percent of the land required under the more of the same approach, smart growth could produce 7.3 million units by producing 10 percent single-family homes; 61 percent in middle-density housing such as townhomes, cottage clusters, and mid-rise buildings; and 29 percent in towers. More of the same would mean 54 percent of new units would be single-family homes alone, which require much more land and infrastructure installation and are often out-of-step with the lifestyle choices of younger Americans.

Because housing is distributed more densely and closer to transit stations, smart growth could reduce vehicle miles traveled by 28 percent, if patterns produced in California hold for other underproducing states. Taking cars off the road improves quality of life and cuts CO2 emissions.

Based on a dynamic, 20-year economic model, the report estimated that growth in a smart-growth approach would create an additional $400 billion in GDP relative to more of the same, or $2.1 trillion in cumulative GDP over the baseline forecast.

The report estimates that smart growth would generate an additional $128 billion in federal income and payroll taxes over the same 20-year period. Local tax revenue, particularly property taxes, would also increase under smart growth.

“This new report makes a strong analytic case for policies that would enable a greater volume of higher density, transit-oriented development,” said Harvard’s Joint Center for Housing Studies’ Managing Director Chris Herbert, Ph.D. “The findings offer compelling evidence that such policies would reduce infrastructure costs and vehicle miles traveled and expand the supply of housing, helping to alleviate upward pressure on rents and home values. Importantly, the report’s recommendations also point to the need to capture a portion of the value created by allowing higher-density development to provide financial support for a much-needed expansion of the supply of affordable housing.”

The research offers four policy prescriptions needed to enable a Smart Growth approach to new housing development. These include:

By Right Approval — Establish “by-right” high-density residential development in a half-mile radius around transit stations (roughly 5 percent of a metropolitan region’s land area).

Impact Fee Recalibration — Recalibrate impact fees to reflect actual costs of infrastructure service for high-density development.

Property Tax Abatement — Use property tax abatement as a gap-financing tool to enable more compact and affordable housing communities.

Value Capture — Establish mechanisms to capture value created through up-zones and tax abatement investments to be used as dedicated funding for a range of housing programs.

“As demonstrated in this report, the shortage of available and affordable homes, coupled with unsustainable rising rents and stagnating incomes has become truly a national problem, especially for lower-income families, millennials, and seniors,” said Ali Solis, President and CEO of Make Room, Inc. and an Up for Growth Board Member. “We know that when a home is affordable and accessible to transit it promotes financial stability and economic mobility. It leads to better health outcomes, improves children’s school performance, and supports employment retention. We simply need the political will to make housing a national priority and support proven smart growth policies, increased investments, and scalable solutions.”

The technical advisory board for the report includes Harvard’s Chris Herbert, Ph.D.; George Washington University and Brookings Institution’s Christopher Leinberger; Peter Linneman, Ph.D., from the Wharton School at the University of Pennsylvania; Carol Galante at the University of California, Berkeley’s Terner Center for Housing Innovation; and Mark Obrinsky, Ph.D., the chief economist at the National Multifamily Housing Council in Washington, D.C.

“This report clearly defines the severity of the housing shortage in the United States,” said Mike Kingsella, Executive Director of Up for Growth National Coalition and one of the authors of the report. “We are challenging policymakers at all levels to come together to pass meaningful reforms that encourage new development for all kinds of housing, including affordable. The status quo is unacceptable and unsustainable.”

Download a copy of the report at https://www.upforgrowth.org/research.

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