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State of the Nation's Housing 2022

Summary of the JCHS report

Sumedha Bose
Builders Patch Staff

SUMMARY

Key takeaways from the Harvard Joint Center for Housing Studies' annual report on housing (2022).

Cost of housing is at an all-time high and continues to rise

Home price appreciation rate nationwide recorded the highest jump in the last three decades, standing at 20.6 percent in March 2022. A 12% increase in rents was recorded nationally for professionally managed properties in the first quarter of 2022. Note that the median rate of rental housing in New York, for example, is up 11 percent on the net from the early 2020 level. Years of under-building have been identified as one of the top causes of this current housing price surge.

1. Single-family rents rose faster than apartments
   Rents for single-family housing nationwide rose 14% in March ‘22, continuing a trend of record growth for the 12th consecutive month.
2. Investors are moving aggressively into the single-family market
   The investor share of single-family homes hit 28% in the first quarter of 2022. Institutional investors with large portfolios (at least 100 properties) are largely driving this growth.
3. Low rental vacancy rates in professionally managed apartments
   An all-time low of 4.8% rental vacancy rates in professionally managed apartments has been noted in the third quarter of 2021, with only a negligible rise up to 5% in the first quarter of 2022.
4. Supply constraint is pushing up rents
   For-sale inventory of existing homes stood at an alarming low of 850,000 units in January ‘22, down 10% from the year-earlier level.

Home Price Appreciation Rates
Source: The State of Nation’s Housing 2022 report by JCHS

Homeownership rates are up but systemic inequality persists

Despite the rise in housing costs and the pandemic affecting people’s financial health, 2.2 million new homeowners were added to the net between 2020 and 2022! This was made possible by the historically low-interest rates, which helped offset price increases and held down monthly mortgage payments. Although homeownership rates have grown for communities of color, the effects of systemic inequalities continue to persist.

1. Younger buyers dominate the new homeowners’ demographic
   The 2020–21 time period witnessed a 1.5% jump in homeownership rates among households under the age of 35 and currently stands at 38.8%.
2. Growing homeownership rates among households of color
   Households of color accounted for 55% of the total growth in homeowners over the period of 2020-21. This number has grown from early 2016 to early 2022 when households of color accounted for half of the total growth in homeowners.
3. Legacy of housing discrimination continues to affect homeownership rates for communities of color
   In the report, homeownership rates recorded for Black, Hispanic, and White household are 45.3%, 49.1% and 74%.

Housing construction records a fifteen-year high!

For decades, residential construction has been unable to keep pace with demand and fortunately, it looks like residential construction is finally picking up pace. The report looked at new residential construction data released by the US Census Bureau and it seems like for the first time in a long time, new construction is aggressively underway.

1. Single-family starts exceed the million-unit mark
   Single-family starts exceeded the million-unit mark for the first time in 13 years by touching the 1.1 million mark in 2021.
2. Multifamily starts at a 30-year high
   Noting a record new construction of 470,000 units.

New Construction Trends - Housing Starts
Source: The State of Nation’s Housing 2022 report by JCHS

What’s ailing the construction industry?

Despite the recorded progress, the construction industry continues to face several challenges that are affecting its efficiency and capacity to produce new housing units.

1. Supply-chain delays
   increased the time to completion, leaving almost 1.64 million homes under construction in April ‘22.
2. Inflationary pressures
   have added to the run-up in the cost of building materials. Price of inputs to new residential construction (excluding capital, labor, and imports) recorded a 20% year-over-year high in February 2022.
3. Chronic labor shortages and rising labor costs, exacerbated by the pandemic, restrict developers' ability to build affordable housing.
4. Restrictive local land use regulations continue to pose a major challenge to high-density development. Solutions include changing zoning laws to allow for different forms of development in areas previously zoned for single-family housing.

Cost of Building Materials - Year-over-Year Change in Prices
Source: The State of Nation’s Housing 2022 report by JCHS

Emerging trends in the construction industry

The report outlines measures crucial for the housing construction industry moving forward, especially to address the climate crisis and adapt housing for an aging population.

• Weatherization
  Many households, especially lower-income ones, lack resources to recover from natural disasters. Retrofitting houses to improve energy efficiency is essential.
• Programs like the Weatherization Assistance Program target low-income households to provide upgrades.
• Retrofitting existing housing stock for an aging population requires construction of accessibility features.
• The Older Adults Home Modification Grant Program allocated funding to support modifications in lower-income households.
• Adaptive reuse, like converting vacant office buildings into residential units, can significantly add to housing stock.

Ongoing affordability crisis and rising housing insecurity

As of 2020, 30% of cost-burdened households spent over 30% of their income on housing, with 14% severely cost-burdened. Renters, low-income households, and households of color are disproportionately affected.

Share of Households Nationwide With Cost Burdens
Source: The State of Nation’s Housing 2022 report by JCHS

The steepest increases in home prices are in metro areas in the South and West. For instance:

• Cape Coral: 41.1%
• Tampa: 31.2%
• Phoenix: 28.2%

The median sales price in 2021 was 5.3 times the median household income. New housing construction primarily serves the upper end of the market, with over half of new homes selling for at least $400,000.

Evictions are back after Covid-era moratoriums end

As pandemic-era housing security measures phase out, housing insecurity is rising:

1. After the end of the CDC's eviction moratorium, filings rose significantly, becoming a major concern.
2. Foreclosure filings jumped 39% in early 2022, highlighting the worsening housing crisis.

Eviction Filings In Thousands (2021-2022)
Source: The State of Nation's Housing 2022 report by JCHS

The future of rental assistance programs

There’s a significant need for ongoing investment in affordable rental housing. The challenges facing Section 8 and LIHTC programs, along with current apartment shortages, threaten affordable housing availability.

• The Rental Assistance Demonstration (RAD) program seeks to maintain affordability while converting units.
• A large number of Section 8 and LIHTC units risk reverting to market rates, necessitating continued support.

Summary

Producing affordable housing remains a primary challenge of the housing market, with supply lagging behind demand. Federal support for vulnerable populations is critical to ensure access to safe and decent housing.

View the original report by Harvard University's Joint Center for Housing Studies (JCHS)