What has caused the housing crisis and what factors are contributing to the continuation

of it?

Kaitlin Rose McCullough

Senior Project Advisor: Erin Cummins Roper
Abstract
The housing crisis affects millions of people's lives and sense housing is a basic necessity it
is important to understand. My research aims to answer why there is a crisis and what
multitude of factors continue to worsen it. I have found that overarching supply and
demand play a huge role but my paper goes into the things that play a role in that. My
research also concluded that salaries are just not keeping up with the cost of living. My
conclusion came to a multitude of things that cause it that we can't change a lot of the
factors but with an increase in regulations and laws that aim to protect low income buyers
and create more affordable supply we can lessen the problem.

12th Grade Humanities

Animas High School

February 20th 2024

Part 1: Introduction

Did you know that, according to the Housing and Land Rights Network, more than 1.8

billion people in the world don't have access to adequate housing! In a study by the Harvard’

Joint Center for Housing Studies, found that “2023 marked the largest single-year increase in the

country’s unhoused population on record” (Napolitano 1). In January 2023 alone, there were 653,

000 who were reported to be homeless. This number is increasing rapidly,’ due to the cost of

housing piled on to the cost of living. In the same Harvard study, it was found that 30% to 50%

of monthly income was spent on housing, leaving little income left to spend on other basic needs.

People need a place to live. Thus, housing is essential and a basic necessity.
 It is important to understand how we got here, why this phenomenon of homelessness is

prevalent, and what factors contribute to this crisis? Having a decent place to live significantly

determines the quality of life. Housing affects the quality and outcomes of someone’s life

starting from where they live as a child. Your zip code becomes a determining factor of your

access to quality education, healthcare, social services, and socio-economic status of the people

you associate with. In fact, if a child living in a low income metropolitan area moves to a high

income metropolitan area, their life expectancy would increase, and they would make 200,000

dollars more throughout their whole life than they would have if they stayed in that same low

income area.

Part 2: Historical Context/Background Knowledge

Introduction to how racial inequality connects with the history of housing in the USA:

Housing segregation is a long standing problem in the USA. There is a long history of structural

racial segregation through housing and zoning in the United States. At present, oppressive

housing segregation is prevalent. Looking back at the civil rights movement, we can see that

racial segregation resulted in housing segregation. Before the civil rights movement (1950s),

“separate but equal” was accepted as a norm. An example of this was White neighborhoods and

Black neighborhoods, these separate neighborhoods were not equal and created a massive divide

in quality of life and opportunities in races. The racial divide continued to be a norm, until there

was a movement to change these structural injustices. Although, even after Jim Crow was

abolished government continued to pursue illegal action in working to pursue separate areas for

the different races. Throughout the 20th century if a white family sold or rented their home to a

black family, the black family's new home in a white neighborhood would be firebombed, with
support and protection from the police. The white family would also go to trial for sedition, aka

rebelling against racist unfair laws. The national library of medicine emphasized “the hypocrisy

of this by the end of the 1960s, legal segregation was abolished, but residential segregation still

continued and still continues in every metropolitan area in the United States” (Rothstein 1).

During the era of the civil rights movement, activists fought to abolish racial

segregation. While in principle, this may have influenced how policies are shaped, the fact of the

matter is that racial segregation continues to be present through housing today. This has caused

generational poverty for many people of color.

Redlining

Redlining is the act of denying people access to credit based on where they live, not if they are

eligible and qualified for loans. History shows that mortgage lenders used to redline

predominantly Black- populated and core urban neighborhoods.“FHA staff concluded that no

loan could be economically sound if the property was located in a neighborhood that was or

could become populated by Black people, as property values might decline over the life of the

15- to 20-year loans they were attempting to standardize” (Rose). This was a way the

government implemented racial housing segregation. The effects of redlining today can be seen

in what are now known as low opportunity areas that are predominantly occupied by people of

color, who have been forced into them and have not been able to get the support and resources to

get to higher opportunity areas.

Although redlining was outlawed, its effects were large and still persist today: “Multiple

studies show that redlining’s harmful legacy has left nonwhite communities struggling with air

pollution, reproductive health disorders, and fewer urban amenities more than 50 years later”

(Apte,Gonzalez). The history of housing segregation is large and deep. It plays a huge role in the
housing crisis today, specifically when looking at low opportunity areas and why they’re lacking

in resources.

Who Is Most Affected

Around 73% of households cannot afford the new median cost of a home. This constitutes about

96.5 million households. Among these households, who is more significantly affected?

America's poorest families are the ones most affected with 87% of the renter households, making

less than 10,000 a year and with around 67% of their total earnings going to housing costs:

“Housing costs should be no more than 30% of your gross income” (nfcc). 67% compared to

30% is a huge difference. We should be aiming to lower the percentage people are spending on

housing for them afford other basic necessities. The poorest families struggle to make needs meet

and are burdened by instability in all aspects of life. There are numerous reasons that people fall

into extreme poverty or low income. Some of these are beyond their control. Some examples of

being low-income that are out of one’s control are lack of education, inequality, gender, race,

and social injustice. And wrapping it back to the housing crisis, a strong example of being out of

one’s control is growing up in a low opportunity area, which impacts wellbeing and overall

income for the rest of their life.

Supply And Demand

The concept of supply and demand could help us understand the impact of financial aspects in

our lives. Supply is the amount of goods or services that are available in the market. On the other

hand, demand is the amount of goods or services that people need and want to buy. So when

there is a large demand for something and not enough supply, prices will increase. We can see

this happening in the housing market. When there is low inventory of housing, coupled with high
material cost, housing prices increase. “The United States is currently experiencing a housing

shortage of between 5.5 and 6.8 million units, with the gap between supply and demand

widening every year” (Santarelli 1). One reason is the lack of inventory due to high building and

material costs. With declining supply and increasing need for housing due to increasing

population, we then are faced with imbalance that leads to a housing crisis. The need for housing

continues to increase, while the supply of housing is decreasing. Supplies to build are becoming

more expensive and harder to acquire. “The COVID-19 pandemic has disrupted global supply

chains and caused shortages of raw materials, driving up costs and delaying construction

projects. In addition, tariffs on imported materials have increased costs for builders, making it

more challenging to construct affordable housing” (Santarelli 2). “Population growth, and

particularly the growth in the number of households, leads to a growth in housing demand”

(Mulder).

Government Subsidized Affordable Housing vs Housing That's Just

Affordable

When we are working to understand the meaning of affordable housing it's important to

understand the different types of (affordable housing) we are looking at.

In this section we are focusing on government subsidized (affordable housing) and

housing that is naturally affordable. When looking at government subsidized housing we are

going to focus on renting subsidies, housing subsidies, public housing, rent supplements, and

home mortgage interest deductions. Renting subsidies is when the government will provide a

subsidy to an apartment owner if they can provide lower rent to low income tenants. Housing

subsidies are government aided programs or assistance to help lessen the burden of housing
costs. Public housing is housing owned by the government Rent supplements is.. And finally

home mortgage interest deductions are…

High Opportunity Vs Low Opportunity Areas

By understanding high vs low opportunity areas, one may realize the importance of adequate

housing and the value of having diverse neighborhoods. A low opportunity area is an area that is

low income, distressed, and typically has larger rates of crime and poverty. A high opportunity

area is an area with higher income population, little crime, and typically has development

happening. Schools, hospitals, stores, and many other resources are within close distance. Low

opportunity areas have limited or unreliable transportation, lesser employment opportunities,

low-performing schools, limited childcare, less healthcare clinics, and a much lower quality of

life. Systemic factors have pushed high percentage of people of color (POC) into low

opportunity areas and taken steps to try and keep them there. Low opportunity areas are one way

that the poor stays poor and pushed to keep the divide and inequality in the housing market.

Thus, zip codes determine the opportunities available and the quality of life in a neighborhood.

Inflation

Inflation is the rise of the cost of living in a specific time period. When we are looking at

inflation we can narrow it down more specifically to the rise of prices of goods and services

compared to a specific time period. Generally high inflation has more negatives than positives

because it takes away people's purchasing power! This just means that the money that people

have saved or make doesn't keep up with the rise of prices taking away the consumers
purchasing power. Housing costs are deeply affected by the rise of inflation “it is forecasted that

house prices will increase 6.3% in 2023 and 2.7% in 2024 nationally” (Kifer 2).

Part 3:
Argument 1:
Why is there a lack of affordable housing? Why are prices so high what are
the main factors contributing to rise in prices?
Theres a multitude of factors that explain why theres a lack of affordable housing
and why housing seems to becoming more and more unattainable. This section
looks into second homes, short term rentals, salaries that don't factor in the cost of
living and the rise in cost of building supplies. Firstly its important to understand
that, housing is a market and the incentive in a market is to maximize profits as
much as one can. Inflation has been on the rise and consumers feel that rise
everywhere in everyday life housing is not left out of that. Just because housing is
a necessity doesnt mean its not going to rise when everything else does groceries
are also a necessity and the cost of them has raised significantly as well. “The
annual inflation rate in the United States has increased from 3.2 percent in 2011 to
8.3 percent in 2022. This means that the purchasing power of the U.S. dollar has
weakened in recent years.”(statistica). Home builders, landlords, and developers
have to keep up with the rise in costs so although it might feel wrong they have to
raise their home prices to keep up with inflation that there also experiencing and
sense its a market they need to make a profit leaving us with higher home prices
than ever before. Secondly we face the issue of second home buyers and short term
rentals that are taking away from the available pool of properties. Lets say we have
a neighborhood of 10 new build available houses and 5 of them get bought by
families but the other 5 become short term rentals or second homes theres now 5
less available homes that could supply housing to a family. Controlling second
home buyers is not feasible or possible if someone has the money to buy a second
home and pay the taxes no one has the right to tell them that they cant. However
the amount of short term rentals like airbnb and vrbo can be regulated by the areas
local government. Although the regulations that aim to control the amount of them
and where they can be specifically located often are violated. “Enforcing
regulations on short-term rentals can be difficult. It often leads to issues with tax
collection, zoning, and adherence to safety standards. Many Airbnb rentals
sometimes violate local zoning laws”(airbnb). Short term rentals have destroyed
many communities and turned once unique charming family towns into empty
gentrified vacation towns. Hanna Barney a Telluride born local states that “ when I
now walk the streets of my town all I see is clearly empty houses all looking the
exact same lacking character and once and awhile during busy seasons a family
will rent them out giving them a sense of life”. Thirdly salary incomes are not
increasing to keep up with rising house prices and the overall rise of cost of living.
“Corporations are still raising salaries and offering other perks to retain employees,
but they’re not necessarily factoring in the cost of living, as that’s not typically
how compensation determination works” (Lorsh, 1). People are spending a risky
percent of there paychecks on housing this leaves other basic necessity costs and
emergency money at a low. This impacts the way people live their lives and easily
has the ability to diminish the quality of live people are living at. And lastly the
cost of supplies has risen significantly for builders and supplies. “Another
significant factor contributing to the housing shortage is the rising cost of
construction materials, including lumber, steel, and concrete”(Santarelli).
The rise of cost in supplies increases house prices because its simply more
expensive to build them. And secondly a rise in cost and heavier restrictions make
builders need more incentive (money) to go through the effort to get the supplies to
build. “In addition, tariffs on imported materials have increased costs for builders,
making it more challenging to construct affordable housing”(Santarelli). Building
affordable housing in general provides a lot less income for the builder but if there
having to go though extra steps and make even less profit than normal the
disincentive outways the incentive leading to a lack of affordable housing.

Argument 2:
What current regulations do we have in place to help ? And what is going on
with development and growing areas is there any legal way to slow that down?
What incentives or distives are there when creating affordable housing?
Argument 4:
So what is being done? What's working, what's not?
So what can we do or what is being done? How do we slow down these rising prices or how do

we keep up with them? There's a combination of things that can help with dealing through this

crisis being Rent Stabilization, Advocating and passing regulations that aim to slow down or

better control development, as well as supporting regulations that are controlling short term

rentals and trying to slow down second home buyers and support the local community first. As

well as supporting laws and bills that are working to make more diverse, affordable and local

housing options. And lastly just bring awareness to how much it costs to live compared to what

people are making and barring that transparency to light with hoping that the awareness can

bring solutions.

Argument 5:
Looking at other stories and opinions and how they shape are thoughts.

Part 4: Discussion and Conclusions

There's a multitude of different factors that are worsening this crisis. Number one being the

growing gap in salaries compared to the cost of living. Secondly being a lack of supply and a

high demand with numerous factors tying into it. Thirdly being the lack of regulations which can

do numerous things to slow down the crisis like creating more diversity in neighborhoods,

regulating rent, providing housing aid to low income people and so much more. There's not a

singular or simple solution and truly stats and data show that prices will only continue to increase

so it's more of a matter of figuring out how we can advocate to get livable salaries and get more

awareness of laws and regulations we can pass to better control and steady the housing crisis.

There's different laws and regulations in cities and depending on the area and specific counties in
the area it feels like more and less of a problem. But it's up to every individual to look up what

they can vote and advocate for in their community to make a change. There's no amazing fix all

solution right now so the more awareness that can be brought to the topic and the more people

we can get it start thinking about solutions the better. I end this by asking you to take action. This

is an issue that is going to worsen. Do your part in understanding the housing crisis and what

each individual can do to prevent and slow down the crisis.

Part 5 Work Cited:

Krechevsky, David. “NAHB: 49% of U.S. Households Can’t Afford a $250K Home.” National
Mortgage Professional, 6 Jan. 2024,
nationalmortgageprofessional.com/news/nahb-49-us-households-cant-afford-250k-hom
e#:~:text=The%20 nationwide%20median%20price%20of,new%20home%2C%20the%20
NAHB%20 said.

Rothstein , Richard. “Segregation in Housing and Education.” The Impacts of Racism and Bias on
Black People Pursuing Careers in Science, Engineering, and Medicine: Proceedings of a
Workshop., U.S. National Library of Medicine, 18 Nov. 2020,
www.ncbi.nlm.nih.gov/books/NBK565026/.

Napolitano, Elizabeth. “Record Number of Americans Are Homeless amid Nationwide

Surge in Rent, Report Finds.” CBS News, CBS Interactive, 26 Jan. 2024,
www.cbsnews.com/news/rent-homelessness-harvard-report-center-for-housing-studies/.

LBM Journal. “Home Prices Are Rising 2x Faster than Income.” LBM Journal, 9 Nov. 2023,
lbmjournal.com/home-prices-are-rising-2x-faster-than-income/#:~:text=Between%20198
5%20and%202022%20%E2%80%94%20the,household%20income%20rose%20just%2021
6%25.
 Riegel, Amy, director. Affordable Housing & How Our Zip Codes Define Opportunities. Amy
Riegel: Affordable Housing & How Our Zip Codes Define Opportunities | TED Talk,
https://www.ted.com/talks/amy_riegel_affordable_housing_how_our_zip_codes_define_
opportunities. Accessed 22 Jan. 2024.

Oner , Ceyda. “Inflation: Prices on the Rise.” IMF, international monetary fund, 30 July
2019, www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/Inflation.

Ross, Jaimie, and Kody Glazer. “Overcoming Nimby Opposition to Affordable Housing -
National Low Income ...” Nlihc.Org, NATIONAL LOW INCOME HOUSING COALITION,
nlihc.org/sites/default/files/2022-03/2022AG_2-11_Avoiding-Overcoming.pdf. Accessed
22 Jan. 2024.

June, ished. “Redlining.” Federal Reserve History, Economic Research,

www.federalreservehistory.org/essays/redlining#:~:text=Redlining%20is%20the%20practi
ce%20 of,Black%2Dpopulated%20neighborhoods%20in%20particular. Accessed 24 Jan.
2024.

“How Is Affordable Housing Created?” Local Housing Solutions, Local Housing Solutions, 1
Feb. 2022,
localhousingsolutions.org/housing-101-the-basics/how-is-affordable-housing-created/#:~:
text=Dedicated%20 affordable%20housing%20united%20
typically,or%2050%20years%20or%20more.

https://www.nfcc.org/blog/how-much-of-your-income-should-be-spent-on-hou
sing/#:~:text=The%20general%20rule%20of%20thumb,than%2030%25%20
of%20your%20income.

https://www.noradarealestate.com/blog/housing-shortage-in-america/#:~:text=
One%20of%20the%20primary%20causes,and%20demand%20widening%20
every%20year.
-Regulatory barriers also play a role in the housing shortage. Many local and
state regulations, such as zoning laws and building codes, can drive up the
cost of new construction and limit the supply of affordable housing. For
example, minimum lot sizes and setback requirements can increase the cost
of land and reduce the number of units that can be built on a given parcel.
Similarly, building codes can add significant costs to new construction
projects, making it more challenging to build affordable housing.
https://publichealth.berkeley.edu/news-media/research-highlights/50-years-
after-being-outlawed-redlining-still-drives-neighborhood-health-inequities#:
~:text=Although%20the%20practice%20has%20been,more%20than%2050%2
0years%20later.

https://www.federalreservehistory.org/essays/redlining#:~:text=Redlining%2
0is%20the%20practice%20of,Black%2Dpopulated%20neighborhoods%20in%
20particular.

https://www.statista.com/statistics/273418/unadjusted-monthly-inflation-ra
te-in-the-us/#:~:text=The%20annual%20inflation%20rate%20in,available%20
funds%20to%20make%20purchases.

https://airbnbtales.com/negative-effects-neighborhoods/#:~:text=Airbnb%2
0can%20contribute%20to%20gentrification,gentrification%20has%20its%20p
ositive%20effects

https://www.noradarealestate.com/blog/housing-shortage-in-america/#:~:te
xt=One%20of%20the%20primary%20causes,and%20demand%20widening%2
0every%20year