Housing Shortage

What Is a Housing Shortage?

A housing shortage exists when a place has fewer homes than it needs. The phrase is used in two related but different ways:

• An overall shortage means too few homes of any kind compared with the number of households that would like to live in an area, plus enough vacant homes for people to move.
• An affordability shortage means too few homes priced within reach of a particular income group, even if expensive homes sit empty.

A region can have both at once, or mainly the second. When the overall supply is tight, higher-income households compete for older, cheaper homes, which pushes their prices up and squeezes lower-income renters further.

How a Housing Shortage Is Measured

Freddie Mac’s method counts “target” households, which include households that would have formed if housing costs were lower, and adds the vacant homes a market needs to function. NLIHC’s method counts a home as affordable when rent and utilities take no more than 30% of income at a given income threshold, and as available when it is vacant or not occupied by a higher-income household. By that measure, NLIHC found only 35 affordable and available homes for every 100 extremely low-income renter households in 2024.

Why It Matters for Workforce Housing

Shortages are not limited to the lowest incomes. In tight markets, middle-income workers can end up bidding for the same older, lower-cost homes that lower-income renters rely on, or commuting long distances to find something they can afford. Local housing needs assessments can estimate gaps by income band, including the 80% to 120% of area median income range that workforce housing often targets. The Congressional Research Service notes that a shortage of housing relative to jobs could be measured with a ratio of jobs to housing units.

Criticisms and Limitations

National shortage numbers depend on assumptions. Freddie Mac’s 2024 estimate came in slightly lower than its 2020 estimate, even though household growth outpaced growth in the housing stock, because it lowered its assumed target vacancy rate from 13% to 11.7%. National totals also hide wide local variation: NLIHC’s estimates ranged from 16 affordable and available homes per 100 extremely low-income renter households in Nevada to 73 in South Dakota.