News & Insights


The undersupply of housing is particularly acute in the workforce housing sector

Among the groups most negatively affected by the housing gap is workforce households, those earning between $45,000 and $75,000 per year in household income. These households make up the largest group of renters, at 9.7 million, or 23.6% of total renter households, according to Kingbird Analysis of 2021 1-Year ACS PUMS Data. Despite this, the supply of housing affordable to this cohort is inadequate to their growing need.


The construction labor shortage and slow productivity growth are so acute it is preventing construction at some points

Residential construction employment has yet to recover from the Global Financial Crisis. Employment in the sector peaked at 1 million workers in 2006, then troughed at 528,000 in 2011. Only 921,700 were employed in the industry as of August 2022 – a similar employment level to July 2004, according to Kingbird Analysis of Federal Reserve Bank of St. Louis Data. As a result, an estimated 70% of construction firms have difficulty finding qualified employees, per Exhibit 11.


Construction costs outpace inflation, undermining housing supply

Pricing and demand have an inverse relationship, all else being equal; as costs rise, demand falls. This has been especially true in the construction sector. Since 2017, costs associated with building new housing rose faster than general inflation, as shown in Exhibit 9. These dynamics limit the ability of developers to construct moderately priced product. Increased costs can also halt new construction altogether, on occasion, as projects become unprofitable to continue.


The unintended consequences of pervasive zoning, land use, and environmental regulations in perpetuating the housing shortage

Increasingly stringent local zoning, land use, and environmental laws and regulations are arguably the most significant headwinds adversely impacting housing production. State and local regulations impose significant risk elements and unproductive costs and serve to limit not only where new housing can be developed, but also constrain the asset class, product type, density, material, and style of new developments.


The chronic housing shortage: Understanding the structural market drivers of the undersupply

New housing supply (i.e., net housing deliveries) is the completion of new housing units, less demolished and newly uninhabitable units. A housing unit is any form of housing accommodation, such as an apartment, townhome, single-family home, condominium, or mobile home. Housing supply has two sources: 1) private construction, or non-governmental enterprises, which makes up 98.5% of new construction spending; and 2) public construction, or government funded construction, which is just 1.5% of construction spending. This White Paper will focus on private construction due to its prevalence as the primary source of new supply.


The growing U.S. population and a decreasing average household size puts pressure on housing demand

Demand for housing is best quantified by the formation of new households. A household is defined as one or more people living in an individual dwelling unit, such as a family living in a home together, roommates sharing a rental unit, or an individual living alone. Household formation occurs when an individual or a group of individuals move from one household into a separate household, such as when a young adult moves out of their parents’ home to live alone, or with a roommate or partner, or when an immigrant (either an individual or family unit) moves into the country. These new households, by definition, need to move into a separate housing unit.

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