The United States is experiencing an unprecedented housing shortage, with demand far outpacing supply. In 2018, the shortfall was 2.5 million homes; by 2024, it ballooned to 6-7 million. This shortage disproportionately affects younger generations, especially those under 35, who struggle to afford homes due to rising costs, stagnant incomes, and limited starter-home construction.
In this explainer video, Patrick Bet-David explores the origins and root causes of the national housing shortage and discusses solutions to fix it. If you’re interested in real estate and housing issues, this video is a must-watch!
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Key Issues Driving the Housing Crisis
- Decline in Starter Home Construction
In the 1970s, 418,000 entry-level homes were built annually. By 2024, this figure had plummeted to just 55,000. In 1976, 40% of new homes were under 1,400 square feet, compared to only 10% today. Builders prioritize larger, more profitable homes, leaving first-time buyers with fewer options. - Soaring Home Prices vs. Stagnant Income Growth
Home Prices: The median home price rose from $23,000 in 1970 to $420,000 today—a staggering 18.3x increase. At the same time, median household income increased only 8x, from $9,800 in 1970 to $80,000 today. That means it now takes an average of seven years to save for a down payment, compared to just 2.4 years in 1970.
- Increased Investor Activity
Large institutional investors like BlackRock, State Street, and Vanguard have entered the market, purchasing low-priced homes in bulk. Investor market share tripled since 2000, making it harder for individuals to compete. These homes are often converted into rental properties, further restricting homeownership opportunities. - NIMBYism and Zoning Restrictions
Local opposition to development, or “Not In My Backyard” (NIMBYism), combined with zoning laws, limits new construction in high-demand areas. - Labor and Material Shortages
According to the latest data, 81% of construction firms report difficulty finding skilled workers. At the same time, costs for lumber and raw materials have surged, exacerbated by the pandemic. This makes building new homes a challenge at every level.
- Generational Challenges
Millennials, the largest generation, are now entering their peak homebuying years (28-43). However, limited supply and inflated prices force many to rent or live with parents—52% of adults aged 18-29 now live at home, up from 31% in 1970.
Proposed Solutions to the Housing Crisis
- Expand Development into Undeveloped Areas
While 82% of Americans live on just 2% of U.S. land, vast tracts of undeveloped land remain available. Take, for example, the city of Frisco, Texas, where the population grew from 6,000 in 1990 to 234,000 in 2024, with home prices rising from $58,000 to $700,000. Other rapidly growing cities include Gilbert, AZ; Katy, TX; Johns Creek, GA; and Aurora, CO. These cases illustrate how strategic investment in new areas can relieve housing pressure in urban centers. - Incentivize Construction of Starter Homes
Governments could offer incentives to builders constructing homes under 1,400 square feet. States and local governments can take the lead by reducing taxes, streamlining permits, or offering grants for affordable housing projects. - Promote Decentralization
Entrepreneurs and land developers can encourage development in less saturated regions through visionary urban planning. Success stories like Dubai’s transformation from desert to metropolis showcase the potential of strategic investment. - Policy Intervention
While price controls are impractical in a capitalist system, targeted initiatives—such as tax credits for first-time buyers or subsidies for small builders—can foster a more equitable market.
The U.S. housing shortage is a complex, multifaceted issue requiring bold action. By incentivizing starter-home construction, expanding development into underutilized areas, and addressing investor dominance, policymakers and builders can create a more accessible housing market. Millennials and younger generations must advocate for these changes to ensure the American Dream of homeownership remains attainable.
If you’re under 35, share this article and discuss these ideas with your peers. Together, we can push for solutions to a problem that impacts us all.
And for more on the unseen hands steering the country’s real estate market, check out this PBD profile of Larry Fink, the founder and CEO of BlackRock who is also one of the most powerful men on Wall Street.
Connor Walcott is the lead writer for Valuetainment.com. Follow Connor on X and look for him on VT’s “The Unusual Suspects.”
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