How COVID-19 might make the affordable housing problem worse
Even before the COVID-19 pandemic, most major cities in the country were grappling with a lack of affordable housing. But with growing increasing unemployment, there is a possibility a lot more individuals will not be able to afford to house. Additionally, construction may also fall due to a drop-down in overall investments in the economy.
Considering that a lot of sectors of the economy will have to grapple with low demand and low income while the economy recovers, the housing market is not necessarily uniquely affected.
However, current issues will only be compounding on an already existent issue. Homes in the country have been increasingly becoming expensive, and scarcely available. This is a crisis that will only worsen in the aftermath of the pandemic.
Housing prices have skyrocketed in many cities in the country. In some of the most expensive cities in the U.S., like New York and Washington, D.C., this has meant that median sales prices have increased over 50% from 2009 to 2019.
Rent prices have also continued to rise, increasing 150% since 2010. In the most affluent cities the median rent price for a one-bedroom apartment is greater than US$2,000.
These price increases have made it increasingly difficult for even middle-class families to rent or purchase homes in many areas in the U.S.
Nationally, 1 in 4 Americans now spend more than half of their monthly income on rent. Another 6 million are considered cost-burdened, meaning that they pay over 30% of their income on rent.
For those working full-time but earning minimum wage, it is now impossible to rent a two-bedroom apartment in any city in the U.S. without being cost-burdened.
A lot of supply-side factors are also at play
The coronavirus has also affected construction work, with other cities shutting down construction activity.
The war on construction accelerated thanks to the COVID-19 response, which shut down numerous activities deemed “non-essential.” City officials from Philadelphia to Seattle have shut down residential construction sites, despite the fact that much of the work could be conducted with sufficiently effective social distancing. And in California, officials extended the already lengthy and costly permitting processes to give third-parties, like neighbors or activists, an additional three months after the current state of emergency ends to file lawsuits objecting to new construction—further hindering building in the near future.
The disruption of the supply chain will also have some effect
The short answer is yes. Nearly a third of home building material inputs come from China, according to the National Association of Home Builders, not to mention more finished products like bathtubs, sinks, appliances, and more. These supply lines have been disrupted.
This could delay home construction at a time when it has finally picked back up. Since the financial crisis, home building has struggled to keep pace with demand because of the cost of construction, lack of available land, and a construction labor shortage.
It is time for lawmakers to act
This should be an eye-opener for state governments that there is no putting off the affordable housing crisis. And while it may take long arguments, citing economic theory; the answer to the shortage of affordable housing has remained simple; build more homes.