Why America's housing shortage is getting worse, even as construction sees its biggest boom in 16 years

Even without population growth, construction is not enough to stop a national housing shortage, Zillow says.

• US housing construction is the strongest it's been since 2007, with 1.45 million homes added in 2023.
• But an increasing number of families searching for homes is still deepening America's ongoing home shortage.
• Five of the most impacted metros are in California. Others include Austin and Seattle.

US housing construction just notched its best year since the great financial crisis, but it hasn't been enough to ease America's home shortage, Zillow reported on Tuesday.

According to the real estate firm, 1.4 million homes were added two years ago, reaching a high not seen since 2007. And while 2023 added another 1.45 million to the inventory, construction will have to accelerate considerably to make an actual dent in the market.

"A large pre-existing deficit suggests that even if the nation were to see no population growth, that increase is still far below what would have been needed to close the deficit," Zillow wrote.

Fueling the stubborn deficit is an overflow of house-hunting families: in 2022, there were over 8 million groups or individuals looking to form their own household. Yet, only 3.5 million homes were available for rent or sale that year, the report said.

That year, the nation's vacancy rate fell to a multi-decade low of 2.5%. Increasing number of families continued to blunt the impact of rising construction in 2023, Zillow noted.

But the consequences of a booming population are also felt differently across the country. Those regions bringing in the most new residents are, logically, undergoing some of the worst shortages in the US.

That includes Austin and Seattle, for instance. Zillow also cited Boston, Sacramento, Portland, San Diego, San Francisco, San Jose, Minneapolis, and Los Angeles as the metros with the deepest lack of homes.

"While the presence of geographic constraints to building plays a role on the coasts, these also happen to be markets with the most strict building regulations in the country," it said.

To unwind these pressures, construction will need policy support, such as zoning reforms that focus on giving more room to single-family units. Other steps include reduced parking requirements, ending permit delays, and supporting housing trust funds.