Due to years of underbuilding, a housing deficit exists in the U.S. How large is the amount of undersupply? That’s a subject of debate among economists. NAHB has estimated the nation is short about 1 million housing units, generating a housing affordability crisis—including home price growth that has outpaced income growth, rising rental burdens, and a doubling of the share of young adults who live with their parents. A separate Freddie Mac estimate of the deficit is even larger, suggesting a housing shortfall of 2.5 million residences.
As part of this discussion, a lot of attention has been given to the “missing middle.” The argument is that the U.S. lacks lower density multifamily or types of clustered housing, including townhouses, duplexes, and certain kinds of low-rise multifamily housing. The claim is valid in that building more of this higher density housing is an efficient way to add additional for-sale and for-rent housing, particularly in high-growth/high-cost metro areas that lack developable land.
But I am concerned that the marketing success of the missing middle has left an important gap: small, single-family detached housing. This housing type is a key source for enabling homeownership among entry-level and first-time buyers, and due to consumer preference and demographic needs, it plays a critical role in the housing market. And like low-density multifamily, it, too, is missing.
Consider recent Census data on single-family home construction. In 1999, 37% of newly built single-family homes had square footage of less than 1,800. Development of that kind of housing has declined considerably over the past two decades. By 2015, just 21% of new single-family homes were less than 1,800 square feet, for a total of 136,000 homes built. Due to gains for higher density single-family building, the share of new single-family homes built with less than 1,800 square feet has since increased modestly to 23%, or 192,000 homes.
Despite these gains in construction volume, this single-family market segment is a key part of the affordability crisis and housing shortfall. Yet this type of housing falls outside the common understanding of the missing middle. While initiatives should be deployed to expand the missing middle, it’s vital that communities do not neglect single-family construction, notably entry-level, for-sale single-family housing that serves as a stepping stone to homeownership. This can be accomplished by lowering regulatory hurdles and improving zoning rules, such as fighting exclusionary zoning practices and the growing use of costly design requirements that crowd out entry-level single-family housing.
