Benjamin Madoff

March 13, 2026

There is something to be said about how widely acknowledged the affordable housing crisis is, yet it continues to persist. Many point to the COVID-19 pandemic as the turning point for the housing market. One of the most common topics of discourse, in this regard, surrounds the influx of work-from-home options coupled with rising housing costs. Due to this influx, many moved away from cities and into suburban single-family homes [1]. When local homeowners and politicians noticed more people were trying to buy houses in their neighborhoods for higher and higher prices, they recognized that the pandemic was evidently affecting the housing market. 

While COVID-19 did have a substantial impact and bring forth heightened scrutiny to the housing market, there are more deep-rooted issues at hand [2]. This crisis has remained prominent all over the globe across many years [3] for renters and homeowners alike. As such, there has been a wide variety of discourse on how to approach this issue. There are multiple potential solutions, including increasing housing supply through zoning reform and densification, investing in transportation infrastructure to connect affordable housing with economic opportunities, and improving access to education and public resources in lower-cost areas. If these solutions are implemented together and correctly, affordability issues could dramatically reduce.

However, before discussing potential solutions to the affordability crisis, it is important to understand the issues surrounding affordability and explore its causes. According to MIT Urban Economist Albert Saiz, there are multiple prominent theories explaining the affordable housing crisis.

There is growing income inequality in many countries; the wealth of low-income and middle-class populations has stagnated, while upper-class incomes have been increasing exponentially. As prices increase worldwide, fewer and fewer people are able to afford what they need. Income inequality is a broader economic phenomenon requires broader distributive and educational policies rather than direct housing policy [3], it serves as a looming issue that many countries are facing, which bleeds into the housing affordability crisis.

Another prominent theory is that the influx of automation, IT, and expanded global supply chains has accelerated the growth rate of productivity of manufactured, tradable goods. In other words, technological advancements allow goods like computers, vehicles, furniture, and clothing to be produced and shipped all over the world at a much faster rate. These breakthroughs have allowed the price of many of these goods to remain relatively consistent (accounting for inflation) when faced with a growing demand.

On the other hand, real estate and services, such as construction are non-tradable goods. Construction is typically done locally, and desirable land is unmovable. There are incredibly limited options for scaling production of housing in response to increased demand. As a result, housing prices have increased relative to other tradable goods [3].

Tying into the previous theory of an inability to scale production of housing, some of the most popular cities that contain better amenities, access to higher-quality education, and high-skill better-paying jobs disproportionately attract residential demand. Such cities include New York City, San Francisco, Boston, and Seattle. Due to many of these places being in coastal or mountainous areas, there is little room for geographical expansion, resulting in an inability to build more infrastructure and housing beyond certain limits [3].

Beyond this, Not-in-my-backyard (NIMBY) anti-development pressures have grown as societies mature worldwide. Increasingly strict municipal policies and regulations make building new housing at high densities incredibly difficult [3]. NIMBY advocates argue that affordable rental housing undermines property values for homeowners, raises crime, and puts a strain on public resources like police and schools [4]. As such, many urban and suburban regions have contested how and where to implement affordable housing strategies despite acknowledging their necessity. 

Research finds that acceptance of housing densification projects decreases with increasing proximity to an individual’s residence [5]. Many residents like the idea of helping out those in need, but they do not want it to be near them.

Each of these theories works together to paint a comprehensive picture as to why the housing affordability crisis continues to persist. Nevertheless, to further understand the gravity of the situation, it is crucial to understand how the housing crisis has gotten worse over time. In the U.S., the recommended or ‘average’ practice is to put around 30% of the household’s monthly income towards rent. Households that pay more than this 30% are described as ‘rent-burdened’. In 2015, a full one-half of U.S. renter households were rent-burdened [6]. This means that 50% of renter households were paying more than 30% of their monthly income on rent, though this number is certainly higher today.

Detailing how housing costs have changed from 2015 requires comparing rent growth and real growth over the same period (from 2015 to 2025). In an ideal, healthy market, wages and rent should rise at a similar rate. Instead, the data show rent rising much faster than earnings.

To measure changes in earnings, The Federal Reserve Bank of St. Louis’ Federal Research Economic Data (or the FRED) Database can be used, which contains and compiles a long-run economic time series including wage data. In 2015, The FRED the median usual weekly earnings for male wage and salary workers in 2015 was $400 in 1982-1984 CPI-adjusted dollars [7]. (“CPI-adjusted” means the figure has already been corrected for inflation and allows for a direct comparison of purchasing power over time.)

The median usual weekly earnings for male wage and salary workers in 2025 was $433 in the same CPI-adjusted dollars. In other words, there was an 8.25% increase in real weekly wages for men from 2015 to 2025. Women’s wages follow a similar pattern, albeit at a lower weekly wage [7]. Despite this increase in real wages, rent has risen at a much higher rate.

According to the United States Census Bureau, the median asking price for rent in 2015 was $813. In 2025, it was $1490. Due to these figures being in “nominal” dollars (not adjusted for inflation), they need to be corrected before comparing them to the wage figures above [8]. Using the Minneapolis Fed Inflation Calculator prices rose by 35.8% overall. Over this same period, the nominal rent increased by 83%. Adjusting for inflation, the real rent increase computes to around 35% [9]. This analysis indicates that the median rent has increased by 35% while the median wage has only increased by 8.25%. This contrast shows a frightening statistic, as rent prices have massively outpaced wage growth. All of this demonstrates that there are certainly many more rent-burdened households today than the 50% of all households in 2015, and that many more people are suffering from a lack of affordable housing.

The housing affordability crisis was also immensely exacerbated by the COVID-19 pandemic. At the beginning of the pandemic, employment fell drastically and destroyed the income of millions. In December 2020, 11 million renter and homeowner households were significantly overdue on their regular housing payments, heightening the risk of losing their homes [10]. At the same time, because of the lack of employment, fewer houses were being built, driving up prices as a result of a high demand (which ties into the second theory stated above). While many have recovered from this time period in some shape or form, the issue of regular house payments still looms for many.

Since households have to devote a larger portion of their income to making payments, they are forced to reevaluate their priorities and budget. They have to decide which food to give up, which pieces of clothing they can live without, and which bills they can afford to pay late without getting evicted. Research has consistently found negative associations on various life outcomes for households facing higher rent-burdens, including declines in mental health and cost-related health care as well as prescription non-adherence among adults [6]. While the pandemic worsened the housing affordability crisis by putting people out of work and increasing inflation rates, it was still present prior. After all, rent-burdens were already rising before COVID-19 due to long-term trends such as stagnant wage growth, increasing housing demand in productive metropolitan areas, and limited housing supply.

The price of rent is not only determined by the location and size/quality of the house. Hedonic pricing theory suggests that rents reflect both housing services and amenities associated with particular residential locations. These amenities factored into rents include those that are essential to family well-being such as access to jobs, quality of schools, and public safety. Other amenities that may influence housing prices are access to luxury amenities like proximity to high-end cultural institutions or restaurants [6]. While well-functioning housing markets might be efficient for pricing housing services and amenities, the inability to increase the supply of natural or other amenities can lead to inequitable household access and inferior quality of life outcomes such as the ones mentioned above. 

This inability to increase the supply of amenities and housing in general, particularly but not exclusively to metropolitan areas, leads to higher housing costs that effectively restrict the number of workers that can reside in the most productive areas and neighborhoods where they may have access to more opportunities for work, higher-quality education, higher wages, and preferred industries [6]. If workers cannot afford to live in the areas where they work, they must travel farther distances, which could potentially result in the need for vehicular transportation, which may result in increased congestion, pollution, and overall worse public health. These specific externalities are just a sample of a wide variety of factors that have been associated with a lack of affordable housing supply within proximity of jobs [6].

To combat the housing affordability crisis, policymakers should prioritize matching the demand for affordable housing with an increased supply. Of course, this is much easier said than done due to a wide variety of regulatory constraints that restrict housing density [6]. Also, in many areas, there is a lack of desirable land for municipalities to order houses to be built within the area. Market forces in high land-cost areas push affordable housing development to distant outlying areas [6], which may discourage people from leaving their current housing if leaving means they have a horrible commute. It is also important to acknowledge the advocates of NIMBY, who might push for new affordable housing to be built far from current commercial and residential areas to protect their ‘property value’ and ‘public resources.’ 

There are multiple potential solutions to help tackle this multi-faceted problem. First, officials can work to ease current regulatory constraints that restrict housing density. Building more large affordable housing complexes that can hold numerous families would be a monumental step towards meeting the current lack of supply of housing. A related measure could be to pass inclusionary zoning legislation for affordable housing development [6]. Although these efforts may be controversial among resident populations concerned about the potential adverse externalities mentioned above, these policy changes would promote increased economic activity and development while aiding those who are struggling, especially those who are rent-burdened.

Measures promoting increased densification and inclusionary zoning will require a parallel investment in transportation infrastructure to mitigate congestion impacts. In other words, it would be necessary to enhance and develop current public transportation systems in areas where affordable housing is approved to be implemented [6]. This would ensure that those who are living in affordable housing are able to access all of the amenities and opportunities other residents enjoy despite affordable housing potentially being built much further away.

Further, affordable housing may be built as means to enhance educational opportunities and child outcomes in the outlying, low amenity areas. State educational authorities can seek to distribute public school resources across districts in a way that reduces the role of local income and wealth in determining the quality of local schools. Reinforcing equitable educational outcomes for those who are living in affordable housing would not only improve their quality of life, but also diminish some of the disadvantages they may face in life outcomes [6]. This investment into education would also serve to lessen the impact of the same income inequality that is part of the reason lower-income families are rent-burdened to begin with.

To address the concerns regarding public health and welfare, mentioned among the potential negative externalities stated previously, state and local authorities should seek to ensure adequacy of environmental and recreational quality across higher and lower rent areas [6]. These solutions could take the form of stricter enforcement of air-quality standards, invest in new parks in underserved areas, and renovate neglected recreational facilities such as gyms and movie theaters.

The housing affordability crisis has remained a key issue for years. The pandemic brought more eyes to the housing crisis and inflamed the problem, but was ultimately not the root cause. The housing crisis has unearthed a large number of economic phenomena, unsatisfactory regulations, and societal prejudices which have served to hinder the progress on establishing affordable housing globally. The first step in countering this predicament is to unravel the root causes of the housing crisis, and then addressing its symptoms in a structural and procedural manner.

Image Credit: BrightFarm Systems, CC BY-SA 4.0 https://creativecommons.org/licenses/by-sa/4.0, via Wikimedia Commons

Works Cited

[1] Spell, Lindsay, and Marc Perry. “More Exurban Communities Now among Nation’s Fastest Growing Places.” Census.gov, May 16, 2024. https://www.census.gov/library/stories/2024/05/exurbs-city-population.html#:~:text=Among%20them%3A%20Rising%20housing%20costs,options%20were%20much%20less%20common.

[2] Angst, Sean, Jovanna Rosen, Soledad de Gregorio, and Gary Painter. “Housing Affordability in the Wake of COVID-19.” Othering & Belonging Institute, September 30, 2021. https://belonging.berkeley.edu/housing-affordability-wake-covid-19.

[3] Saiz, Albert. “The Global Housing Affordability Crisis: Policy Options and Strategies.” SSRN Electronic Journal, October 2023. https://doi.org/10.2139/ssrn.4402329.

[4] Rockne, Anna. Not in My Backyard: Using Communications to Shift “NIMBY” Attitudes about Affordable Housing. Retrieved from the University Digital Conservancy, June 28, 2018. https://hdl.handle.net/11299/198187.

[5] Wicki, Michael, Fiona Kauer, Katrin Hofer, and David Kaufmann. 2025. “Nuancing NIMBYism: How Regulatory Preferences Shape Public Acceptance of Housing Densification.” Journal of Urban Affairs, April, 1–21. doi:10.1080/07352166.2025.2486040.

[6] Gabriel, Stuart, and Gary Painter. “Why Affordability Matters.” Regional Science and Urban Economics 80 (January 2020): 103378. https://doi.org/10.1016/j.regsciurbeco.2018.07.001.

[7] FRED. “Fred Graph.” FRED. Accessed March 3, 2026. https://fred.stlouisfed.org/graph/?id=LEU0252882500A%2CLEU0252883400A%2C#.

[8] U.S. Census Bureau. “Table 11A.  Median Asking Rent for the U.S. and Regions: 1988 to Present .” U.S. Census Bureau, n.d. https://www.census.gov/housing/hvs/data/histtab11.xls.

[9] Minneapolis Fed. “Inflation Calculator.” Federal Reserve Bank of Minneapolis. Accessed March 3, 2026. https://www.minneapolisfed.org/about-us/monetary-policy/inflation-calculator.

[10] Consumer Financial Protection Bureau. “Housing Insecurity and the COVID-19 Pandemic.” Consumer Financial Protection Bureau, March 2021. https://www.consumerfinance.gov/data-research/research-reports/housing-insecurity-and-the-covid-19-pandemic/.