Homebuyers need to earn 80% more than in 2020 to afford a house in this market. It’s not just due to high mortgage rates

In recent years, the gap between housing costs and wages has been widening, posing a significant challenge for many Americans. This issue, highlighted by economist C. Kirabo Jackson of the White House Council of Economic Advisers, has its roots in the mid-1990s when housing prices began to diverge from median wages, making homes increasingly unaffordable.

One of the primary reasons for this affordability crisis is the tight supply of housing. The number of new housing units being built has been on a decline, largely due to restrictive land-use and zoning regulations. These regulations often limit the type of housing that can be built, such as imposing height restrictions or minimum lot sizes, which in turn reduces the overall housing supply.

To combat this issue, experts like Jackson and Divounguy suggest that increasing the housing supply is crucial. This can be achieved by easing land-use and zoning regulations, allowing for more diverse and dense housing developments. For instance, replacing single-family homes with high-rise buildings in certain areas could significantly increase the number of available housing units.

Some regions have already started to see a rise in new housing inventory due to relaxed zoning rules. In markets where builders are permitted to construct smaller, attached homes, there has been a surge in new construction, particularly in the South. However, in areas with more restrictive land-use regulations, the necessary construction to meet housing demand is lagging.

While local zoning rules are typically beyond federal control, the government is encouraging flexibility at the local level through financial incentives to help developers build more affordable housing. As Jackson points out, with a growing economy and population, it’s imperative to build more housing to accommodate this growth…………[read more]

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Considering the relationship between housing affordability, land-use regulations, and economic growth, how might changes in zoning laws impact local economies and the overall quality of life for residents?

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