How Many Units Are Needed? Measuring Housing Shortages in the U.S.

• In Event: Zoning, Regulations, and Housing Supply

Abstract

The lack of housing supply has reached crisis levels, gaining recognition from the U.S. White House. Despite this growing attention, there is no consensus on how to measure housing shortages, with existing estimates varying widely—from 1.5 to over 20 million units—depending on assumptions, definitions, and data sources. This ambiguity undermines effective policy design and public understanding. To address this gap, this paper presents a theory-driven framework for estimating housing shortages across U.S. metropolitan areas and evaluating their impacts on housing affordability and well-being.

This study develops and empirically tests three distinct "gap metrics" based on theoretical constructs that capture different dimensions of excess housing demand: the Job-Household Growth Gap, the Missing Household Gap, and the Natural Vacancy Gap. These metrics correspond to three hypotheses of how shortages manifest: (1) that housing supply lags behind job growth; (2) that suppressed household formation results from affordability constraints; and (3) that low vacancy rates hinder housing market efficiency. By quantifying the gap between theoretically expected and empirically observed outcomes in each domain, the paper offers a multi-dimensional and empirically validated method for identifying housing shortages.

Using datasets from the 2006–2021 American Community Survey, the 2000 Decennial Census, and Bureau of Labor Statistics employment data, the paper estimates these metrics for 235 metropolitan statistical areas (MSAs). The findings reveal that housing shortages are not limited to high-cost coastal cities but are increasingly pervasive in Sun Belt and mid-sized metros, ranging from 2.4 million to 4.1 million units as of 2021. 

To assess the validity and relevance of these metrics, the paper employs panel fixed-effects and two-stage least squares models, identifying robust associations between shortage indicators and key housing outcomes. Specifically, higher gap metrics predict increased price-to-income ratios, higher renter cost burdens, and lower rates of household formation and homeownership among young adults. These results affirm that the metrics meaningfully capture the pressures residents face in constrained housing markets.

This paper contributes to housing policy debates by offering a transparent, replicable, and reproducible methodology for diagnosing shortages. It introduces a diagnostic tool for identifying where and how shortages develop over time. By connecting excess demand metrics to observable affordability pressures, the framework supports more data-driven, geographically targeted housing policies. This work is especially timely as state and federal governments consider zoning reforms, housing subsidies, and supply-side interventions to address affordability crises nationwide.

Author

• Seongmoon Cho, University of Southern California
  Presenting Author