The Housing Crisis: Why Home Prices Are Outpacing Incomes and What Might Change

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Imagine this: a simple chart showing how the price of homes has shot up, leaving incomes trailing far behind. And, right alongside, rent has climbed too. It’s more than a trend; it’s a full-blown housing crisis, with a root cause that’s surprisingly straightforward—supply and demand. Too few houses for too many people? Prices surge. An oversupply? They dip. Right now, there aren’t enough homes to go around, especially for those looking to buy.

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And while it might seem like the easy answer is “just build more homes,” getting there isn’t as simple as it sounds.

The Challenge of Finding Land and Zoning Laws

Let’s say you’re a developer with plans to build affordable homes. First, you need to secure land—a challenge on its own. Maybe you’ve identified an old house you could tear down to make room for a few new homes, or you’ve got your eye on a big parking lot where you envision a mix of apartments and shops. But here’s where things get tricky: that land may not be zoned for housing at all. Local governments decide what types of buildings can go where, and getting them to rezone land for housing can be a battle.

Neighbors, often referred to as “NIMBYs” (Not In My Backyard), can be a powerful force against change. They come to town halls and push back on developments, worried about everything from increased traffic to crowded schools. Sometimes their resistance is enough to halt projects before they even begin. But let’s say you manage to get past this hurdle—congratulations, but you’re only getting started.

Preparing Land: Costs, Permits, and Impact Fees

Next, the land itself needs to be prepared. This could mean demolishing an old building, ensuring the soil is safe, or creating drainage systems. Each of these steps requires compliance with local and federal standards, involving more money and more time. And then come the impact fees—charges from the city that cover the infrastructure strain your new homes will place on things like schools and public transportation. It’s a way for local governments to pass on the cost of growth to the developer, which in turn increases the price of the final home.

The High Cost of Construction Materials and Labor

Once the land is ready, it’s time to build, but even this isn’t straightforward. Take lumber, for example, which remains expensive despite coming down from pandemic highs, partly due to tariffs on Canadian imports and ongoing demand. Lumber is essential—it's the backbone of most homes in the U.S., and the cost can make or break the affordability of a new home.

Then, there’s labor. With a shortage of skilled tradespeople like electricians and plumbers, you might need to hire over 20 specialized contractors just to complete one house. And throughout the project, you’ll need building permits and regular inspections. Many cities face staffing shortages, which means inspectors are stretched thin, causing delays and driving up costs further.

Financing the Homes: Federal Programs and Incentives

To make a home affordable, builders often rely on government incentives. For instance, there’s the Low-Income Housing Tax Credit, which offers cash incentives to those willing to sell or rent homes to lower-income families. Interest rates also affect costs, as higher rates make borrowing money more expensive, which then inflates the price buyers pay.

Enter the 2024 Presidential Candidates: Two Paths to Housing Relief

This is where the candidates’ proposals come into play. Former President Donald Trump’s plan zeroes in on increasing land availability. He’s suggested opening up federal land, especially in places like Nevada where the government owns significant acreage, making it easier for developers to access land. However, much of this federal land is in rural or protected areas, so the impact might be limited. Trump also wants to cut regulations, though he hasn’t specified which ones, and has voiced support for preserving single-family zoning, which aligns with NIMBY views on restricting large-scale housing developments in certain neighborhoods.

Vice President Kamala Harris, on the other hand, takes a different approach. She focuses on funding, with plans for expanded tax credits and grants to encourage developers to build affordable homes. Harris’s plan also includes a $25,000 down-payment grant for first-time homebuyers, helping middle- and lower-income families enter the housing market. She proposes investing in trade apprenticeships to address the labor shortage, hoping to bring down construction costs and reduce delays.

 Builders’ Perspective: What Would Make the Biggest Difference?

Ask developers, economists, and researchers what would solve the housing crisis, and they all come back to the same point: land, labor, and materials. They suggest reducing tariffs on lumber, making it easier to rezone land for housing, and training more people in the trades to ease the skilled labor shortage. These experts argue that the housing problem starts at the local level—where zoning laws and impact fees can either open the door for new housing or slam it shut.

The Role of the Federal Government

While a president can influence housing policy, many of the big changes needed to lower housing costs—like zoning reform and lower impact fees—are decided at the state and local levels. That said, federal programs and incentives can still help by funding affordable housing and encouraging more people to work in construction. Moreover, a president’s ability to use the “bully pulpit” to shape public opinion and push for broader change in zoning and land use can make a difference.

The housing crisis is complex, but with aligned efforts from local governments, builders, and federal initiatives, there’s hope for making homes affordable again. For now, though, the journey from empty land to affordable housing remains a challenging one, with each step adding costs and hurdles.