Zillow: US housing shortage hit 4.7 million in 2023

The U.S. faced a shortfall of 4.7 million homes in 2023 — the largest housing deficit on record — according to a new Zillow analysis of U.S. Census Bureau data.

Persistent inventory shortages continue to drive the national housing affordability crisis, limiting access to homeownership and forcing millions of people to share homes with non-relatives.

“The unfortunate fact is that we still don’t have enough housing in this country for people who need it. Construction has helped prevent the housing deficit from ballooning, but it hasn’t yet begun to close the gap,” Orphe Divounguy, senior economist at Zillow, said in a statement.

“We know what works: lower building restraints to allow for more density and less expensive housing. More of these measures at the local level can help get more homes built and begin to ease this outsize financial burden for millions of Americans.”

Construction slows but doesn’t reverse deficit

A spike in home construction due to pandemic-driven demand helped to slow the growth of the housing deficit — but it has not been reversed, according to Zillow.

In 2023, the deficit rose by 159,000 homes — a slower increase compared to the 257,000-unit jump in 2022. Among the 50 largest U.S. metro areas, the most severe housing deficits were found in New York, Los Angeles, Boston, San Francisco and Washington, D.C.

The U.S. added 1.4 million housing units in 2023, up from 1.3 million in 2022, after accounting for demolitions. Meanwhile, the number of households also grew — although at a slightly slower pace, resulting in fewer families needing to share housing compared to the previous year.

Still, an estimated 8.1 million families were living with non-relatives last year. While some choose to live with roommates, Zillow data suggests that many would prefer separate housing if affordable options were available.

Affordability limits remain a major obstacle

Homeownership remains out of reach for many Americans. In 2019, a median-income household could afford to purchase a typical home. As of 2024, Zillow reported, that same household would require an additional $17,000 in annual income to afford the mortgage payments on a typical home priced at $368,000.

That was only the tip of the iceberg as mortgage affordability, based on a 20% down payment, required more than $50,000 per year in additional income in several of the largest metro areas.

Mortgage rates have dipped slightly from last year, but affordability remains a significant barrier — particularly for first-time buyers.

Zillow found that cities with fewer restrictions on construction activity saw faster responses to increased demand during the COVID-19 pandemic. These markets experienced slower home-price and rent growth compared to cities with tighter zoning and development rules.

Small changes in zoning in large metro areas — such as permitting accessory dwelling units (ADUs) or multiunit homes like duplexes and triplexes — could result in the construction of millions of additional homes, Zillow added.

Builders completed 1.45 million housing units in 2023, and that momentum continued into 2024, with 1.63 million units completed — the highest annual totals since 2007.

Millennials accounted for the largest share of households “doubling up” with non-relatives in 2023, representing 38% of such living arrangements. They were followed by Gen Z at 29%, Gen X at 17%, and baby boomers and older generations at 16%.