What 2024 holds for U.S. residential real estate
Navigating the U.S. housing shortage: challenges, solutions and the road ahead
What’s the Point?
The housing crisis in the United States presents challenges for both buyers and sellers, primarily due to high interest rates and a shortage of homes to satisfy the rising demand. Looking ahead, a narrow focus on building single family homes alone will not overcome this deficit. Local government interests and private developers can enhance the living experience for their constituents by focusing on creative community-building that incorporates units for people at all income levels, fostering diverse and equitable neighborhoods.
The nation’s housing shortage and strategic building solutions
The United States is grappling with a housing deficit of approximately 3.2 million homes, a significant factor contributing to persistently high prices. Reasons for the shortage range from a lack of available labor to build homes, financing challenges for smaller developers, and regulations over land use and zoning restrictions.
National for-rent multifamily demand over the past decade was juiced by a surge in younger millennials and Gen Zer entering their household-formation years as well as their baby boomer parents who suddenly became empty nesters and no longer needed the larger space and hassle of their single-family homes. Compounding the issue is a decline in housing starts across 55 major metropolitan areas. Over the next decade, the two fastest growing age cohorts will be the aging of the boomers into their older retirement years and the aging of the millennials into the 35-54 year-old cohort where child-rearing becomes a dominant factor in housing choice.
Addressing the shortage and making housing more affordable requires a multifaceted approach. Paul Zarian, a managing director at Hines, identifies three critical components to solving the crisis: permitting, design and delivery, and partnerships.
Zarian emphasizes the need for early discussion of zoning priorities, broad community engagement, and a clear vision to help people imagine the benefits of establishing new, vibrant communities. “Master planning, placemaking, and walkable amenities, along with education on attainable housing benefits, can help alleviate local opposition,” Zarian says.
Building successful partnerships with delivery stakeholders is also crucial. Zarian suggests partners embrace new master plan styles and formats while sustaining a presence in communities post-completion. “Collaboration with governments to deliver projects that are strategic for their communities can be profitable for our investors while providing benefits to society as a whole,” he says. Examples include Fenton in Cary, North Carolina, a 92-acre mixed-use district, and West Edge in LA, featuring office space, luxury apartments, attainable housing, retail and amenities, both of which have resulted in vibrant, curated communities.
What lies ahead and where?
Demographics suggest the current housing shortfall is especially acute for single-family housing, but the overall deficit suggests most housing product will be in high demand. Hines research estimates that total housing starts will have to increase from 720,000 per year over the past 10 years to more than a million per year through 2030 to satisfy demand.
Among the 54 MSAs that Hines analyzes, nearly all markets fell short, with Greater New York and Los Angeles experiencing the most significant deficits. New Orleans, Austin, and Nashville stand out as notable exceptions, exhibiting slight surpluses.
Here are observations about important local markets tracked by Hines:
For further insights into how Hines is addressing development for residential communities, visit: