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The state of the U.S. housing market has been one of the defining economic stories of the past two years. Since the beginning of the COVID-19 pandemic, housing has become more expensive for both buyers and renters. The median home sales price in the U.S. has increased by more than one-third since the beginning of the pandemic, rocketing past $400,000 in 2021. The rental market was relatively calm early in the pandemic, but renters now are paying more than 25% more on average than they were at this time last year.
Inadequate housing supply has been a key factor contributing to issues with housing affordability in the U.S. for years. Federal mortgage backer Freddie Mac estimates that the U.S. has a 3.8 million unit shortage of housing. But the pandemic has only exacerbated the issue of supply. Housing inventory fell to record lows in 2020. The shift to working, schooling, and socializing from home increased preferences—and competition—for larger, single-family homes among both buyers and renters. And ongoing supply chain challenges and labor shortages have made it difficult for builders to add new stock: building permits and housing starts have recovered strongly since early in the pandemic, but completions have failed to keep up.
However, as the U.S. emerges from the pandemic, one promising sign for housing supply is an uptick in planned multi-family home construction. Multi-family housing increases the density and availability of housing units in urban and suburban locations, and it is more efficient and cost-effective to develop than single-family stock. And with more people now returning to their offices—along with restaurants, bars, venues, and other amenities—denser housing closer to work and social attractions is regaining its appeal.
For several years prior to the pandemic, the total number of multi-family units authorized held steady, while multi-family units as a share of total units authorized experienced a slow decline. Both of these figures increased in 2019 but fell off again with the onset of the pandemic in 2020. In 2021, however, the total number of multi-family units authorized jumped from 491,700 to 621,700, which brought the share of multi-family units authorized from 33.4% to 35.8%.