Navigating the Housing Shortage: The 10 U.S. Cities Struggling in 2024

1. Introduction
2. San Francisco, California
3. Los Angeles, California
4. Seattle, Washington
5. New York City, New York
6. Austin, Texas
7. Washington, DC
8. Miami, FL
9. Phoenix, AZ
10. Houston, TX
11. Conclusion

Introduction

The United States has been grappling with a housing shortage for several years, with demand for affordable homes far outstripping supply in many cities. Zoning regulations, complicated permitting processes, limited land, and, lately, high mortgage rates and increased construction costs are the main factors driving this imbalance, contributing to skyrocketing home prices and rental rates. What are the cities with the biggest housing shortages? This article will delve into the top cities in the U.S. currently facing the most severe housing shortages.

U.S. Cities with the most significant housing shortage

San Francisco, California

San Francisco is known for its high cost of living and limited housing supply. Strict zoning laws, limited land, and a lengthy permitting process are the main factors suppressing the number of new developments.

Even though the city has gone through a decrease of 11.8% in home prices since 2022, San Francisco remains one of the most expensive cities in the U.S., with demand for affordable housing far outstripping the available supply. As of today, the city requires around 4,000 additional new apartments every year to keep up with the growing demand.

Construction bounced back during 2021, but in 2022, San Francisco recorded a drop of 58% in new apartments, with just 7,400 new apartments. Things, however, are about to change, and new construction will increase.

A few months ago, the city’s mayor London Breed announced an 8-year-long plan to build 82,000 new homes, 56% of which are affordable housing. The executive and legislative actions of the project aim to tackle the core of the housing crisis in the city by rezoning, reducing fees, cutting red tape, accelerating approvals, and curtailing the ability of project opponents to slow down or kill projects.

Los Angeles, California

Los Angeles’ growing population, demand from international buyers, and limited housing inventory increase rentals and sale prices. 63% of homes in Los Angeles are rent-occupied, while the city requires 6,000 more new apartments yearly to balance housing supply and demand.

To deal with the housing shortage, the city has adopted the TOC – Transit Housing Communities – Incentive Program that incentivizes affordable housing development near transit. For example, if a developer wants to build close to the intersection of a Metro rail and a rapid bus line, they can increase the building’s density by up to 80%, while the parking spot requirement can also be lifted.

Since 2017, the program has granted incentives to more than 36,000 new housing units, almost 8,100 of which for affordable units.

Seattle, Washington

Seattle’s growing tech industry is the primary factor behind the increased housing demand over the last few years. However, housing construction has yet to keep pace, contributing to today’s elevated home prices and rent rates.

Seattle’s housing shortage is a complex equation to solve. Undeniably, in fast-growing cities, housing supply is almost impossible to keep up with demand. Nonetheless, the city gives housing developers several incentives to deal with increased demand.

• Multifamily Tax Exception: A program that provides tax exemptions on eligible multifamily projects in exchange for income- and rent-restricted units.
• Rental Housing Program that funds the development of affordable rental housing using local, federal, and other fund sources.
• Incentive Zoning for Affordable Housing allows commercial and residential developers to achieve additional capacity in certain zones as long as they provide affordable housing.

The city counted 15,341 new housing units for 2022, while at the beginning of that year, the city’s housing pipeline included 14,100 under-construction units.

New York City, New York

NYC, the nation’s most populated city, faces a significant housing shortage issue. New residential developments do not suffice to meet the increasing demand for housing as the job market drives population growth. With one of the most aged housing stocks in the country, city authorities need to take immediate measures to deal with the city’s need for more affordability.

NYC requires 10,000 new apartments yearly to meet the growing demand and is one of the few cities in this list that has seen an increase in sale prices during 2022. More specifically, prices are up 2.8% since last year, averaging $622,000.

According to REBNY, the city needs 560,000 new housing units by 2030 to meet demand. At the same time, in November 2017, the city’s plan included 300,000 either new or preserved, affordable units by 2026. From 2017 to 2022, the city has built 136,756 new residential units and 80,852 for low-income households. In the first quarter of 2023, the city’s housing pipeline included 23,117 apartment units in under-construction multifamily buildings. At this rate, New York will not be able to deliver the desired number of units and additional developments will be required. 

Austin, Texas

The job market’s rapid growth, with companies like Tesla, Amazon, Google, and more expanding or relocating to the city, has increased demand for housing. Alongside that, outdated zoning regulations are deteriorating Austin’s housing shortage. Even though the city has experienced an influx of new homes in the last 23 years, with 59% of homes built after 2000, meeting the current demand would require 8,000 new apartments yearly.

To deal with increased demand and lack of affordable housing, city authorities issued a 10-year-long plan to increase the supply. According to the City’s Strategic Housing Blueprint, adopted in 2017, 60,000 affordable housing units are for those making less than 80% of the median family income. As of 2021, the city’s plan was not on track to meet its goal. However, there was progress in several areas. You can review the detailed scorecard with the plan’s progress here.

Driven by the slowing influx of tech workers from coastal cities and not by increased supply, prices dropped for the first time after a long period in 2023. According to Zillow’s Home Values Index, home prices are 2.5% lower year-over-year.

Washington, DC

The housing shortage in Washington, D.C., has become a pressing issue in recent years as the city grapples with a surge in population and a scarcity of affordable housing options. This crisis has been exacerbated by an influx of high-income professionals, a limited supply of available land for new developments, and HUD management failures, as recently discovered. As a result, living costs have skyrocketed, displacing low-income residents and amplifying socioeconomic disparities within the nation’s capital.

According to THE GAP: The Affordable Housing Gap Analysis, in 2021, Washington D.C. and its surrounding areas, Arlington and Alexandria, recorded a deficit of almost 150,000 affordable housing units.

On March 2019, the city’s mayor set the goal of reaching 36,000 new housing units by 2025, 12,000 of which were affordable for households below 80% of the Median Family Income. The plan included both new developments and renovations of existing units. As of April 2023, the city had reached 82% of this goal with 29,395 new units, while the broader D.C. pipeline includes another 13,441 under-construction apartments.

Despite the increased supply, average rents in 2023 scored a 3% increase since the last year, averaging $2,369.

Miami, FL

The housing shortage in Miami, FL, has become a critical concern as the city faces an increasing demand for affordable homes amidst a backdrop of soaring real estate prices. Since 2022, home prices have increased by more than 12.5%, averaging about $540,000. Factors include a booming tourism industry and an influx of wealthy foreign investors.

Consequently, the city is witnessing a widening gap between the demand for affordable units and the available housing supply. And even though some housing projects are trying to provide residents with much-needed affordable housing options, the city still needs to solve the problem as it would require 7,000 new apartments yearly to meet demand. The city’s housing pipeline currently includes 17,553 under-construction apartments in multifamily buildings expected within the next three years.

On May 2022, the city launched the Building Blocks, a $70 million fund designated for 18,000 new and rehabilitated housing units. Today, the initiative counts 1,530 completed units, while another 2,363 are under construction. The project targets the workforce, particularly those making 80% to 110% of the average median.

Atlanta, GA

Rapid population growth and economic development have fueled Atlanta’s housing shortage. Financial and tech companies moving into the city, and large development projects, such as the BeltLine, are bringing more people and money to the local economy, driving prices to new levels. And while income and demand have increased, new residential developments are hard to keep up, no matter how hard the effort.

Even though the city’s housing stock counted 9,230 units in February, which increased by 39.9% since last February, the market still faces a substantial shortage, creating opportunities for sellers to achieve higher prices. Home prices trajectory is reflective of that situation. Since 2016, average home prices have increased more than 80%, averaging about $373,000 today.

More multifamily developments are on the way, with the city expecting almost 21,500 new units during 2023, while the entire housing pipeline counts 147,881 new apartment units in the pipeline’s various stages.

Phoenix, AZ

Phoenix is in a very similar situation. The city’s economic growth has escalated housing demand alongside population and income. Consequently, home prices and rental rates have surged, pricing out many low-to-middle-income families and intensifying the need for affordable housing solutions.

In 2019, the city announced a plan to address the housing shortage in Phoenix. According to the program, the city plans to preserve or create 50,000 housing units by 2030. Even achieving such a goal, though, would not suffice for supply to meet demand in the city. Between 2000 and 2015, Phoenix underproduced 505,000 housing units, and the population has been growing disproportionately to the number of new housing units since then. This resulted in the severe housing shortage the city experiences today and substantially contributed to the elevated home prices and rents residents have to pay.

As of March 2023, the average home price has increased by more than 20% since two years ago.

Houston, TX

The housing shortage in Houston has grown increasingly problematic as the city contends with a burgeoning population and a rising demand for affordable housing options. Driven by its diverse economy, job opportunities, and relatively low cost of living, Houston has attracted an influx of new residents, straining the housing market and pushing upward property prices and rental rates.

Even though experts expect home prices to flatten, rents keep posing a significant burden on residents. City authorities and local communities attempted to tackle the problem with an immense community land trust. However, so far, it counts only 136 affordable homes in its inventory. The city’s housing pipeline includes 6,075 apartments under construction in multifamily buildings, planned to be delivered within the next three years.

Conclusion

The housing shortage in the United States is a complex issue that requires a multi-faceted approach. As we’ve seen, cities nationwide are grappling with this crisis differently, from implementing zoning changes and providing financial incentives to developers to launching affordable housing initiatives and public-private partnerships. However, the scale of the problem suggests that more than these measures are needed.

While many cities are making strides in addressing the housing shortage, it’s clear that more needs to be done. This could include further easing zoning restrictions, increased funding for affordable housing initiatives, and innovative solutions like community land trusts. Addressing the housing shortage will require a concerted effort from all stakeholders, including government agencies, developers, non-profit organizations, and community members.

Other than the attached links, the data mentioned throughout the article are sourced from We Are Apartments and Berkadia’s Research.