Money For the Rest of Us
The Housing Affordability Crisis: What Caused It and How to Fix It
Sep 11, 2024
Discover the shocking 40% rise in housing prices and rents, driven by restrictive zoning and central bank policies. Explore why half the global population is frustrated with housing affordability. Learn how the Great Financial Crisis shaped today's market and the consequences of short-term rentals. Delve into government efforts to boost housing supply and potential solutions like reducing zoning restrictions and encouraging auxiliary dwellings. Find out what individuals can do while waiting for the crisis to ease.
23:54
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Quick takeaways
- The dramatic increase in home prices has caused median households to allocate nearly 44% of their income to housing costs today.
- A critical shortage of new home construction, influenced by stricter lending and zoning regulations, is contributing to the housing affordability crisis.
Deep dives
Rising Home Prices and Affordability Challenges
The housing affordability crisis has been exacerbated by dramatic increases in home prices, with the average U.S. home price rising over 38% since January 2021 and 50% since 2015. Home price-to-median household income ratios have reached an all-time high of 7.74, indicating that a significant portion of income is being allocated to housing costs. As an example, a median income family today can expect to spend about 44% of their income on housing, a stark contrast to just 28% in 2013. Additionally, the rental market mirrors this trend, with 50% of renters considered cost-burdened, spending more than 30% of their income on rent and utilities.
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