Is the U.S. Building the Right Kind of Housing to Address the Housing Shortage?

As the housing shortage in the U.S. intensifies, policymakers, developers, and property managers are grappling with solutions to meet the growing demand. While new construction is essential, the question remains: are we building the right type of housing to solve the problem? An in-depth look at current development trends, tenant needs, and demographic changes suggests that we may not be hitting the mark. Here’s a look at why the current approach to new housing construction might not be effectively addressing the housing shortage and how the industry can shift its focus.

1. Mismatch in Housing Types and Affordability Needs

a. High Demand for Affordable Units, But Low Supply: The majority of new housing developments in the U.S. have focused on luxury and high-end units, which cater to wealthier renters and buyers. These units are often marketed to high-income individuals in urban areas who can afford premium rents. This trend stems from developers’ need to offset high land, construction, and labor costs, but it creates a supply-demand mismatch for lower- and middle-income renters who represent a significant portion of the population.

b. Middle Housing Types Are Underdeveloped: The U.S. has seen a decline in “missing middle” housing—affordable, smaller-scale housing options like duplexes, triplexes, and townhomes. This type of housing was once common in residential neighborhoods but has become scarce due to restrictive zoning laws and local regulations that limit multifamily units. As a result, there’s a shortage of more moderately priced rental and ownership options, leaving many households with few choices.

2. The Shift in Demographics and Living Preferences

a. Increasing Demand for Multi-Generational and Co-Living Spaces: The need for diverse housing types is further underscored by changing household structures. More families are choosing multi-generational living arrangements due to rising costs, caregiving needs, or cultural preferences. Additionally, younger renters increasingly favor co-living spaces for affordability and flexibility. However, the current housing stock does not adequately reflect these preferences, with most new developments continuing to focus on traditional single-family homes or small apartments.

b. Urban and Suburban Dynamics Are Evolving: Population shifts are driving increased demand in suburban areas, especially as remote work becomes more common. However, many suburban areas lack the necessary infrastructure, zoning flexibility, and housing density to accommodate this influx. Developers often face resistance when proposing higher-density projects, but with proper planning and zoning reforms, suburban communities can offer mixed-use developments and transit-accessible housing, meeting the needs of both new and long-term residents.

3. Barriers to Building the Right Kind of Housing

a. Zoning Restrictions and Regulatory Hurdles: Zoning laws across the U.S. often favor single-family homes over multi-unit dwellings, creating a barrier to affordable housing construction. Strict zoning limits hinder the development of duplexes, triplexes, and small apartment buildings in many neighborhoods. By revisiting and modernizing zoning regulations, municipalities can support the construction of diverse housing types that better meet the needs of today’s renters.

b. Rising Construction and Land Costs: Construction costs have soared in recent years, driven by rising prices for materials, labor shortages, and high land costs. For developers, building affordable units at scale is challenging without subsidies or incentives, which are often insufficient or limited. To bridge the gap, federal and local governments could consider expanding subsidies or implementing tax incentives specifically targeted at creating middle-income and affordable housing.

4. How Property Managers Can Adapt to Meet Market Needs

a. Expanding the Range of Available Units: Property management companies can work with developers to advocate for and manage a variety of housing options, including smaller units, shared spaces, and multi-generational housing configurations. By diversifying their portfolio, property managers can serve a broader demographic and capture the growing market of renters looking for non-traditional housing arrangements.

b. Supporting Sustainable and Affordable Solutions: Sustainable building practices, such as modular construction and energy-efficient designs, can help lower long-term costs for both developers and renters. Property management companies can encourage developers to integrate sustainable solutions into new projects to attract cost-conscious tenants and help lower operational expenses.

c. Leveraging Adaptive Reuse and Repurposing Existing Buildings Repurposing underused commercial spaces or older buildings into residential units can address housing needs without the time and expense required for new construction. Property managers are uniquely positioned to manage these spaces and ensure they are well-suited for residential tenants. Additionally, adaptive reuse allows cities to revitalize unused properties, which benefits communities and meets housing demands.

5. A Path Forward: Building the Right Type of Housing for the Future

To effectively address the housing shortage, the real estate industry needs to focus on creating housing that aligns with today’s demographic needs, affordability constraints, and lifestyle preferences. The “one-size-fits-all” approach of luxury developments and single-family homes no longer aligns with the realities of the current housing market. Instead, a combination of regulatory changes, zoning flexibility, and incentives for affordable housing is essential to allow developers and property managers to build and maintain housing that meets the market’s needs.

idBliss Property Group is adapting to these trends by expanding service offerings, focusing on tenant retention through affordability, and collaborating with stakeholders to promote housing solutions that serve diverse tenant bases. By taking a proactive approach, our property managers can play a key role in helping communities overcome the housing crisis and provide homes that truly meet the needs of today’s renters.