The United States needs to construct an additional 5.5 million housing units to compensate for a slowdown in housebuilding over the past two decades, according to a report by the National Association of Realtors. The housing lobby group, who published the report last week, says that “the scale of underbuilding and the existing demand-supply gap is enormous, and will require a major national commitment to build more housing of all types by expanding resources, addressing barriers to new development, and making new housing construction an integral part of a national infrastructure strategy."

The report details the extent to which the U.S. residential construction sector has been lagging for the past two decades. While the supply of housing grew at an average annual rate of 1.7% from 1968 to 2000, this slowed to 1% in the last two decades, and only 0.7% in the last decade alone.

Due to this slowdown, the report estimates that the country has built 5.5 million fewer housing units than it would have in the past 20 years, had the rate of construction remained stable. When this slowdown is combined with the loss of existing units to demolition, disaster, and decay, this gap in supply grows to 6.8 million units.

In order to address this gap, the report estimates that the U.S. would need to accelerate its housebuilding rate to more than 2 million units per year for the next decade; a 60% increase from 2020’s output of 1.3 million units. This rate, which is more than the U.S. built each year during the mid-2000s housing boom, is even more challenging given the COVID-19 pandemic where construction costs have soared.

Last month, we detailed how increased lumber prices are one of several factors currently exacerbating America’s housing shortage, where inflated costs have added an average of $36,000 in expenses to each new development. The current disruption to material supply chains caused by the COVID-19 pandemic may take between 18 months and two years to fully resolve, according to the 2021 Autodesk Construction Outlook. 

The National Association of Realtors report also sets out some of the consequences of the U.S. slowdown in housebuilding. The number of adults aged 25 to 34 living at home with parents has surged by 2.5 million since 2020 and has more than doubled in the last 20 years to a current figure of 8 million. The supply of housing has also declined rapidly during the COVID-19 pandemic. In January 2021, the U.S. available housing inventory fell to 1 million homes, the lowest level since tracking began in 1999 and one-third of the historical average.

The full report is available here.