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Where the housing shortage is getting worse

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When job growth outpaces new construction, renters pay for the mismatch

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Construction of new houses and apartments hasn’t kept pace with job growth in major cities, according to a new Apartment List report, which compared employment stats and housing permits to find which cities are falling behind the most. A strong contributor to both the nation’s housing shortage and dearth of affordable housing, the gap is widespread. The report discovered that only 10 of the nation’s 50 largest metros has managed to create enough new housing to keep up with job growth.

A prime example of a city falling behind is San Francisco. It was already falling short directly before and after the Great Recession, generating three jobs for every one new housing unit between 2005 and 2010. But since then, the mismatch has only gotten worse: the rate more than doubled to 6.8 jobs per new housing unit between 2010 and 2015.

Apartment List

These kind of gaps have led to rising rental costs as well as extended commutes, as workers forced out of increasingly expensive downtowns seek the next nearest home or apartment they can afford. Construction of new units nationally hit a low point after the Great Recession, with the number of permits issued hitting a record low in May of 2009. While the industry has recovered, it still isn’t keeping pace with economic growth. The construction labor shortage—the number of companies building homes dropped by half between 2007 and 2012—has only exacerbated the problem.

Nationally, the number of households grew by 11.2 million between 2005 and 2015, while only 9.9 million new housing units were constructed during the same period. In many booming metros areas, the lack of housing has been a stark lesson in supply and demand. During that 10-year period, San Jose had both the largest undersupply of new construction, as well as the fastest rent growth, 57 percent.

The report also found that, not surprisingly, downtowns and core counties were even more supply burdened than surrounding areas. The report found that core counties accounted for 57 percent of the new jobs generated, but just 49 percent of new units, a dynamic pushing more workers to live in the suburbs.

Apartment List

While the general trend has been upward, those cities with robust construction have been able to slow growth. A few examples from the Apartment List report illustrate this point:

  • Charlotte added about the same number of jobs as San Jose. It also issued permits for three times as many housing units, so rents only rose 30 percent
  • Denver, another city grappling with growth, added 2.9 new jobs for every new housing unit; rents shot up by 52 percent between 2005 and 2015
  • For comparison, Atlanta, which only added 25,000 less jobs than Denver, permitted twice as many units and saw rent only increase by 25 percent.

Apartment List drew from U.S. Census data on building permits and Bureau of Labor Statistics (BLS) data on employment for metros and counties across the nation.