Affordable Housing Crisis: Why Are Homes So Expensive?

Why are homes so expensive?

It is known that housing is one of the basic human needs, and currently, affordable housing is becoming very difficult to get for many people, especially Americans. Note that housing is considered affordable only if it takes 30% or less than the total income of the household.

According to research carried out, almost half of the 47 million renter spends more than 30% of their family income on housing. Something needs to be done.

There’s a need for about 3.8 million to 5.5 million housing units in the US alone. We need to build more houses for first-time homebuyers, and low and average-income families and give these families affordable financing tools to enable them to compete in buying these homes. This is very important if we must solve the affordable housing crisis. 

Remember that the lack of good affordable housing has lots of negative effects on communities.

Like I always tell my friends, families, without housing experience bigger stress when it comes to health care, food security, retirement, transportation, and even social stability. It can also lead to increased traffic and negative environmental impacts for those proximate to job centers. 

Where Affordable Housing Is Worst

Indeed, America is experiencing a housing crisis, and according to the report, there’s Housing Underproduction in the U.S., especially in California. The affordable housing crisis is more acute in California than in any other place. It is where the state median home price is doubling more than the national average. 

As for me, California’s housing shortfall was created over decades. This is because of the combination of high population growth and the act of restrictive building policies. There’s also a hindrance to housing construction due to regulatory laws such as CEQA. However, the housing shortage for many years has been a high-profile talking point. Many housing advocates and politicians are sponsoring controversial new laws such as SB 9, and this is what bans single-family zoning effectively. 

For many years, lots of policies that are meant to address the complexities in getting affordable housing, such as rental assistance, have lacked funding, and deferred. A few months ago, the Biden administration released the Housing Supply Action Plan, which is meant to address the rising cost of the rental and affordable housing shortage. The administration aims to do this via comprehensive short- and long-term housing investments which are to focus on increasing housing supply, especially for low and average-income people. It was meant to solve this by:

  • Improving the supply of affordable house units in rich neighborhoods.
  • Multiplying housing voucher subsidies are vital to ensure many families receive the help they need.
  • Improving renter’s protections to ensure housing owners do not lose it since eviction is one of the issues of economic instability.

The Causes Of The Affordable Housing Crisis

In my opinion, the issues of getting affordable housing happened during years of rock-bottom interest rates and the loss of lending standards which fueled a housing price bubble around the U.S. and worldwide.

Though, this started with good intentions with the bursting of the dot-com bubble, many corporate accounting scandals, and the terrorist attacks on September 11. Not only that, but the lowering of the federal funds rate by the Federal Reserve from 6.5% in May 2000 to 1% in June 2003 also influenced it. However, the aim was to improve the economy via the availability of money to many businesses and consumers at bargain rates.

However, this caused an upward spiral in housing prices since borrowers took advantage of the mortgage low rates. This also made people with poor or no credit history to be able to own a home. This soon gave birth to a big secondary market for developing and distributing subprime loans to consumers. 


  • The financial crisis of 2007-2009 developed gradually. In early 2006, home prices began to fall.
  • While subprime lenders in early 2007 began to file for bankruptcy.
  • The two big hedge funds in June 2007 finally failed, weighed down by investments in subprime loans.
  • There were losses in August 2007 from subprime loan investments which brought lots of panic that froze the global lending system.
  • The Lehman Brothers in September 2007 collapsed in the biggest U.S. bankruptcy ever.

The Fall Of New Housing Supply After The Great Recession

What I can say is that the housing supply fell dramatically after the Great Recession, which squeezed a lot of would-be homebuyers out of the market.

And because of this, these homeowners were then forced to stay in the rental market, which also adds up pressure on rental prices. It also made people who have low income and less wealth go into more insecure and unstable rental housing. 

Note that the new housing supply cratered after the 2007–2009 housing crisis which recovered very slowly. Though this drop in housing supply was sharpest during the end of the Great Recession.

There was a fall in authorizations of single-family units as well as multifamily units of housing (the buildings with five or more units) during and after the housing crash. 

I remembered that the years after the Great Recession 2010 and 2011 witnessed a dearth of improved multifamily building constructions. There was a drop to 30,000 units which happened to be the lowest amount on record since 1968. However, this made a bad situation even worse and exacerbated the unavailability of housing even while demand was on the increase.

So Who’s To Be Blamed For The Great Recession?

The affordable housing crisis in the United States long predates the COVID-19 pandemic. This housing issue recently appeared during the Great Recession, which lasted from 2007 to 2009.

This is due to the increasing demand for housing while there was a low supply of new housing units. Many were flushed out of the housing market, especially the low-income people, which added lots of pressure on demand for rental properties.

While people with higher incomes and more wealth can afford to rent high-cost housing when they don’t buy. This left lower-income individual renters fighting over an insufficient pool of available rental units.

As for me, I think I would put the greatest part of the blame on lax mortgage lending policies which have allowed lots of consumers to borrow far more than they could afford. However, there are lot of blame to go around, which includes:

  • Those predatory lenders marketed ownership of homes to buyers who could not possibly pay back the mortgages that were offered to them.
  • Those investment experts bought those bad mortgages and then made them available for resale to investors.
  • Those agencies overrated these mortgage bundles and made them look safe to buy.
  • The buyers never cared to unload the bundles and failed to examine the mortgage bundle’s ratings.

What Drives Demand For Affordable Housing?

When looking at the problem with housing supply, we can’t solve the affordable housing crisis without attention to housing demand. So why are homes so expensive? Why are over 20 million renter households especially lower-income housing cost-burdened? 

The problem is with the redistribution of wealth and income for the past 4 decades and the shrinking of the middle class. Currently, the bigger share of the aggregated income is going to the higher-income households, while the share of the average and lower-income households is falling apart. 

The research done by Pew Research shows that the share of American adults who live in average-income households has diminished from 61% in 1971 to 51% in 2019. However, this shift of income has minimized the size of households that could have afforded the market-rate rents. This is now contributing to the issues with affordable housing according to American progress

So What Are The Solutions To The Affordable Housing Crisis?

Lift Condo Lending Restrictions

There’s a record low in the construction of condominiums, which are one of the solutions for first-time buyers. Both State, local, and federal government-sponsored agencies’ restrictions on condo lending happen to be a bigger barrier to first-time homebuyers who need a loan.

Change Local Policy

There should be local policy changes such as primary tax policies which have exacerbated the redistribution of wealth for the past 4 decades. Indeed, local land-use regulations have continued to constrain the construction of affordable housing units. 

In the 2022 Budget Resolution, the Biden administration provided lots of resources for housing. However, most of them are focused on increasing the housing supply by making more funds available to support both multifamily and single-family home development and preservation. 

The development of affordable housing units will be significant and will undoubtedly increase supply. However, unless the Biden administration can address regressive measures to redistribute wealth to the lower and middle classes, and federal tax policies, the affordable housing crisis will persist

Also, the Biden administration has to address the challenges of local opposition to affordable housing units by allocating funds to help these communities reform zoning laws to minimize barriers to construction.

Focus On Already Made Housing

In my opinion, we need to focus on already made housing that is built entirely or partially in factories and assembled on-site. This is because these prefabricated housings are an attractive solution due to their lower cost of production than homes built on-site.

There were roughly 240,000 manufactured homes shipped annually before 1995, which is less than 100,000 produced annually today. Also, modular, panelized, and precut housing contributed 7% of new single-family homes in the 1990s when compared to just 3% today.

However, there’s the possibility that we can add 200,000 units of new, affordable housing annually by improving construction in these areas. Remember, expanded zoning and flexible building code could help increase the creation of already made housing.

There Should Be An Increase In Accessing Home Financing

A lot of communities across the country don’t have access to affordable financial services, and this creates a barrier to owning a home.

During the COVID-19 pandemic, the gap between white and Black mortgage applicants grew rapidly. The  2019 Zillow report, shows that Black applicants were denied 74% more than white applicants.

This simply means that more than 20% of Black Americans who applied for a mortgage were denied in 2020. And this represents the highest denial rate for any ethnic or racial group. It also shows that only 10.7% of white applicants were denied a loan in that same year. So there should be equity-centered financing if we must solve the affordable housing crisis.

Note that equity-centered financing is what will create opportunities for owning a home, especially for working families and communities of color who can’t access family support or intergenerational wealth. 

The Self-Help Federal Credit Union is a nonprofit organization that creates economic opportunities for all, especially people of other ethnic or racial groups, both women and rural residents. They help by lending to small businesses and nonprofits and also help in providing responsible financial services, which include transparently-priced accounts. 

This credit union has partnership deals with the Keys to Equity, which helps in providing permitting, designs, construction, and financial assistance to some consumers who want to build an accessory housing unit on their property.

The Protection Of Tenants Facing Evictions Problems

As you know, some tenants will fall behind on payment of their rent as they encounter rising costs of rent. Most also face other costly expenses such as widespread economic emergencies, health care and child care, and insecurities. So there should be an increase in overall housing security for renters.

Note that these renters will require protection to ensure their homes are safe while they get back on their feet. Housing authorities can use a range of tenant protections technics to supplement the value of additional affordable housing unit supply, which may also include:

  • Increasing tenant protections to ensure that people are housed, not just during the pandemic but also during an economic crisis.
  • Protection of households who face eviction by providing renters’ right to counsel which will better counter eviction proceedings and prevent homelessness across the country.
  • Erasing the barriers to getting future housing by stopping evictions from credit reports and public records. This will help to empower individuals who have experienced the trauma of home eviction. There’s a stigma of eviction that’s detrimental to struggling families which limits future housing options. Once authorities stop an eviction, landlords won’t be able to deny house applicants based on their past eviction.

Needs To Empower Borrowers

In my opinion, none of these solutions will succeed at increasing affordable and stable homeownership if there’s no way to empower households with better financing tools. Getting Mortgage credit has remained difficult since the Great Recession, especially for first-time buyers. 

The local, state and federal government-sponsored agencies must ensure they ease financing restrictions for borrowers generally. They can do this by enabling more small balance mortgages, especially those under $100,000, with simplified processes, underwriting flexibilities, and discounted fees and costs. This will help to ensure that many low and average-income families obtain modest homes. 

There should be down payment assistance, especially for first-generation homebuyers. This will also create room for low-income families with a much-needed start on the path to owning a home.

Research has shown that there are millions of renters, low and average-income families, and people of other races who meet the criteria to secure a mortgage. These people have done their best in positioning themselves to have a home. So there’s a need for housing authorities to do their part by ensuring that there are homes for them to buy and there are reliable financing tools for them to benefit from.


As we all know, getting an adequate supply of housing is an ongoing crisis. There’s an estimate of almost 6 million rental units shortfall for lower and average-income families and a single-family home supply shortage of about 4 million units.

However, there are no easy methods to address the affordable housing crisis. It means that affordable rental homes will remain in short supply, and renters will face high and ever-rising costs.

But policymakers and authorities must have the tools and resources to make sure that there is a higher supply of affordable rental units, and financial and better protections, for renters. Changing policies can strengthen a lot of existing programs with the infusion of much-needed capital.

Additionally, at the state and local levels, there should be policies to help in reducing preventable evictions. However, one way to get this done is through expanding landlord-tenant community courts and improving the engagement of social service providers which will help avoid the high costs of eviction.

In my opinion, the challenges relating to affordable housing demand must be studied and addressed through federal policies that will minimize the wealth gap between the rich and poor, and put more income in the hands of potential home renters to help them afford the housing that they need. 

By Faith B

I'm Faith, a talented copywriter with many years of experience in creating top-notch content in the housing space. While I enjoy research, singing and chatting, my friends still call me an introvert.

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