Nevertheless, several challenges highlighted in the Joint Center’s first report persist today. In the 1980s, high mortgage interest rates put the cost of homeownership out of reach for many. With fewer young adults buying homes, demand for rental housing remained high—as did rents despite a boom in multifamily construction. Rapid losses of low-cost rentals forced millions more lower-income households to spend outsized shares of their incomes on housing. Despite their growing numbers, only about one in four very low income renters benefited from subsidies to close the gap between market rents and what they could afford to pay.
Homeownership rates among young adults today are even lower than in 1988, and the share of cost-burdened renters is significantly higher. Soaring housing costs are largely to blame, with the national median rent rising 20 percent faster than overall inflation in 1990– 2016 and the median home price 41 percent faster. Although better housing quality accounts for some of this increase, sharply higher costs for building materials and labor, coupled with limited productivity gains in the homebuilding industry, have made housing construction considerably more expensive. Land prices have also skyrocketed as population growth in metro areas has intensified demand for well-located sites. In addition, new regulatory barriers have also served to limit the supply of land available for homes and increased the time, complexity, and risks of housing development.
Along with soaring housing costs, weak income growth among low- and moderate-income households has also contributed to affordability pressures. The real median income of households in the bottom quartile increased only 3 percent between 1988 and 2016, while the median income among young adults in the key 25–34 year-old age group was up just 5 percent. Meanwhile, gross domestic product per capita, a measure of total economic gains, increased some 52 percent in 1988–2017. If incomes had kept pace more broadly with the economy’s growth over the past 30 years, they would have easily matched the rise in housing costs—underscoring how income inequality has helped to fuel today’s housing affordability challenges.
Joint Center for Housing Studies of Harvard University