Picture this: buying a house today takes a bigger bite out of paychecks than at any point since the run-up to the 2008 crash.
Goldman Sachs reckons the mortgage payment-to-income ratio has shot past 30%, up from under 20% before the pandemic. Renting isn’t much kinder, with the share of income going to rent at its highest since 1980.
The culprit, in Goldman’s telling, isn’t just high rates. It’s a decade and a half of weak construction. Since the financial crisis, homebuilding hasn’t kept pace with population growth, leaving a hole of about 3 to 4 million homes, or roughly 2% of the housing stock. California and Florida top the shortage charts.
Why can’t builders catch up? Three roadblocks stand out.
First, restrictive zoning laws. About 60% of residential land in major metro areas is capped at three stories.
Second, there’s simply less undeveloped land near job hubs, so sprawl has limits.
And third, construction productivity has actually been falling, with projects taking longer and skilled labor harder to find.
Loosening land-use rules could move the needle. Goldman estimates that if regulations were relaxed to the level of the least restrictive quartile of cities, builders could add 2.5 million units over the next decade, enough to cover two-thirds of the shortage.
Markets like New York, Washington, Orlando and Philadelphia would see the biggest boosts. But history suggests reforms are tough to pass and often only nibble at the problem.
For investors, the upshot is a housing market where affordability looks stretched and supply lags demand. That’s a setup that tends to support prices, though it leaves policymakers and would-be buyers with a thicket of hard trade-offs.