The affordable housing crisis in the US: A deepening challenge for communities

The U.S. currently grapples with a growing affordable housing crisis that has burgeoned into a nationwide concern. Significant inflation, stagnant wages and a growing population struggling to secure safe and affordable housing have contributed to this predicament. COVID-19 further exposed vulnerabilities and inequalities within the housing market, intensifying the need for immediate attention and innovative solutions.

Amidst this national crisis, Montgomery County, Maryland, experienced notable changes in its housing market. In August 2023, the median home price rose to $289,900—a 3.6% increase from the previous month and a 32.5% surge compared to August 2022. The cost per square foot also saw a year-on-year increase of 7.2%. Homes in Montgomery County spent a median of 45 days on the market in August, down from 51 days the previous month. 

A primary driver of the affordable housing crisis is the persistent rise in inflation. The Consumer Price Index (CPI) reported a 0.6% increase in inflation in August and a 0.3% uptick in September, far surpassing the growth in wages for many Americans. This stark disparity between income and expenses places a heavy burden on households, especially in terms of housing costs. 

The Federal Reserve, responsible for monetary policy and economic stability, faces limited options to combat inflation, resorting to raising interest rates. However, for everyday Americans, this action translates to higher borrowing costs for mortgages, auto loans and credit card debt, adding to financial strain.

Stagnant wages constitute another critical facet of this crisis, given that the federal minimum wage has lingered at $7.25 per hour. In many regions of the country, this rate is insufficient to meet the criteria for a living wage. The concept of a living wage, determined by location-specific cost-of-living data, underscores the growing gap between minimum wage and the income needed for necessities such as housing, food, healthcare and transportation. As this gap steadily widens, American workers contend with a mounting cost of living while their earnings remain stagnant.

The Federal Reserve reports a decrease in household savings over the past two years, highlighting that many American households are financially vulnerable. In 2021, U.S. households collectively held approximately $2.1 trillion in savings, offering a robust financial safety net. However, as of July 2023, this reserve had dwindled to $198 billion. This substantial reduction in savings indicates increased financial susceptibility, driven by relentless inflation eroding purchasing power, stagnant wage growth and the lingering economic repercussions of COVID-19.

In addition, the resumption of interest on federal student loans after a pause of over three years adds to financial hardships. Over 43 million Americans will need to make payments again in October. While the Biden administration introduced a new student debt relief program, numerous borrowers still face a “payment shock” as they brace for this substantial expense.

These economic challenges carry profound implications for the housing sector. As the cost of living rises, the goal of homeownership grows more distant for numerous individuals and families. Soaring inflation has led to housing price spikes, rendering homeownership unattainable for many. Limited wage growth further exacerbates the issue as Americans earn less money, and the value of their earnings diminishes. 

As the U.S. confronts the affordable housing crisis, the challenges Americans face are multifaceted and pressing. The combination of mounting inflation, stagnant wages, shifting housing dynamics, dwindling savings and the resurgence of student loan interest creates a formidable challenge that impacts millions of Americans. Addressing these economic hurdles remains a top priority for policymakers and communities nationwide.

Written by Claire Liu of Clarksburg High School

Photo Courtesy of Flickr