For years, the prevailing consensus among real estate investors, policymakers, and economists has been straightforward: the United States is severely short on housing. According to this widely accepted narrative, a multi-million-unit deficit—largely blamed on a sluggish construction pipeline following the 2008 Great Financial Crisis—is the primary driver behind soaring home prices and unreachable rents.
However, a groundbreaking study by researchers Kirk McClure, professor emeritus at the University of Kansas, and Alex Schwartz paints a starkly different picture. Analyzing demographic shifts and housing data from 2000 to 2020, McClure and Schwartz found that the vast majority of U.S. housing markets actually possess an adequate supply of total housing.
During a recent appearance on the real estate podcast On the Market, hosted by Dave Meyer, Professor McClure sat down to unpack the methodology behind the study, discuss why millions of vacant homes do not neatly solve the affordability crisis, and explain why he believes the housing market’s true pain point is rooted in income inequality rather than a physical lack of bricks and mortar.
Main Facts: What the Research Actually Shows
The core finding of McClure and Schwartz’s research directly challenges the housing shortage dogma. When analyzing decennial census data spanning from 2000 to 2020, the researchers discovered that the U.S. housing stock grew significantly faster than both population and household formation.
- Population Growth: The U.S. population grew by approximately 17.8% between 2000 and 2020.
- Household Formation: Households grew at a faster pace of 20.3%. (A household represents a distinct unit of demand; for example, if two children move out of their parents’ home and rent separate apartments, one household expands into three).
- Housing Production: Total housing units grew by a remarkable 21.2%.
Because the housing stock grew at a faster rate than household formation, basic economic logic dictates that total supply outpaced total demand on a macro level. To test whether this was an illusion caused by "aggregation bias"—where booming markets mask declining ones—the researchers broke down the data across every county and metropolitan area in the United States.
Out of roughly 900 metropolitan and micropolitan markets tracked by the Census Bureau, about 140 were found to be declining in population. When McClure and Schwartz evaluated the remaining 760-plus growing metropolitan markets, only 19 actually exhibited a true housing shortage—defined as a market where housing production failed to keep pace with household formation over the 20-year span.
Chronology: How the Data Was Manipulated by Shifting Baselines
One of the most critical elements of McClure’s research involves challenging the starting points used by institutional forecasters. Prominent studies—such as those published by Freddie Mac and the National Association of Realtors (NAR)—have routinely declared a massive national housing shortage, often pointing to a deficit of 3.8 million to 4 million units.
According to McClure, these alarming figures are largely a byproduct of the baselines chosen by analysts.
- The 2000 Baseline (Balanced Growth): McClure and Schwartz chose the year 2000 as their starting point because it followed a decade of balanced, stable economic growth. During the 1990s, population growth, household formation, and housing production tracked closely together, creating a healthy equilibrium.
- The Post-Bubble Glut (2000–2010): During the decade leading up to the 2008 financial crisis, the U.S. experienced an immense building boom. For every 100 households formed, the nation built upwards of 140 housing units, creating a massive multi-million-unit inventory overhang.
- The 2010 Baseline Flaw: When organizations like Freddie Mac analyzed the market starting from 2010—the immediate aftermath of the Great Recession—they captured a decade of depressed construction. By starting from a point of artificial oversupply and ignoring the glut that preceded it, subsequent analyses mistakenly concluded that the U.S. was suffering from a chronic, structural shortage.
Supporting Data: Affordability vs. Unit Availability
If the U.S. has enough total housing units, critics naturally ask: Why are home prices and rents so unaffordable?
McClure points to economic research from the Federal Reserve, which highlights a distinct "K-shaped" divergence in the economy. When comparing the Case-Shiller Home Price Index to median household income, historical data shows that home prices closely track aggregate wealth rather than median wages.
While the average middle-class worker faces stagnant wage growth, a massive segment of high-income, high-wealth households has amassed extraordinary capital through the stock market and corporate earnings. Because the U.S. tax code heavily subsidizes homeownership (allowing primary homeowners to shelter up to $500,000 in capital gains from taxes), wealthy buyers have repeatedly bid up the prices of owner-occupied homes.
The Rental Market Paradox
A similar dynamic exists in the rental market. While the total number of units is adequate, lower-income wage earners have been priced out of homeownership and pushed into renting. This surge in demand has driven up rents faster than median renter incomes.
However, McClure makes a vital distinction: The shortage does not exist across the entire market; it is heavily concentrated among very low- and extremely low-income households.
- While renters earning 50% or more of the Area Median Income (AMI) have plenty of units available, those making poverty wages cannot afford standard market rents.
- Even if developers build more "market-rate" or mid-tier apartments, filtering does not work efficiently enough to bring prices down to the $500–$700 monthly range needed by the poorest Americans.
Official Responses and Industry Pushback
Unsurprisingly, McClure’s findings have faced significant pushback from traditional housing advocates, developers, and economic institutions that rely on the "shortage narrative" to underwrite deals and lobby for legislative changes.
Many analysts, such as those at Moody’s Analytics, argue that depressed household formation rates among younger generations (like Gen Z) are evidence of a suppressed market caused by a lack of housing. They suggest that if housing were more abundant and cheaper, more young adults would move out and form independent households.
McClure counters this argument by pointing to broader socioeconomic pressures. While a lack of housing plays a minor role, the primary reasons Gen Z and younger millennials struggle to form households include:
- Staggering student loan debt.
- High costs of higher education.
- Stringent bank lending standards (the traditional 28/38 debt-to-income mortgage rules).
- Stagnant entry-level salaries and the prevalence of gig work, which fails to meet the strict underwriting criteria required for mortgages.
Furthermore, government programs designed to boost supply—such as the Low-Income Housing Tax Credit (LIHTC)—often miss the mark. McClure notes that LIHTC units frequently cost $1,200 to $1,400 a month to build and operate, adding supply to a middle-income tier that is already saturated, while doing almost nothing to help families earning extreme low incomes. Moreover, research indicates an 85% displacement rate: for every 100 tax-credit units built, 85 fewer market-rate units are constructed by the private sector.
Implications: Rethinking Federal Housing Policy
The implications of McClure’s research are profound for investors, policymakers, and everyday Americans. If the U.S. does not have a broad, macro-level shortage of housing units, then heavy federal subsidies aimed at boosting nationwide construction may be barking up the wrong tree.
1. Shift from Construction Subsidies to Direct Rental Assistance
McClure argues that spending billions of dollars on supply-side tax credits is an inefficient use of federal funds. Instead, expanding demand-side programs like the Housing Choice Voucher (Section 8) program is far more cost-effective. By putting financial aid directly into the hands of low-income renters, the government can help them afford units that already exist, rather than paying developers to overbuild the middle market.
2. Reform Homebuyer Assistance
Rather than believing the answer is to "build, build, build," policymakers should focus on better utilizing existing housing stock. Programs that help low-income first-time buyers with down payments, lower loan-to-value ratios, and provide mortgage insurance to smooth out irregular incomes would yield better long-term social outcomes.
3. Reevaluate Tax Code Subsidies for the Wealthy
McClure sharply criticizes current tax policies that allow high-net-worth individuals to shelter massive capital gains from home sales. As Washington debates raising the $500,000 capital gains tax exemption for homeowners, McClure warns that continuing to subsidize the wealthiest 15% of homeowners exacerbates income inequality and fuels unnecessary bidding wars in affluent submarkets.
Conclusion
As the real estate market navigates high interest rates, shifting buyer sentiment, and fluctuating inventory, Kirk McClure’s research serves as a sobering reminder that economic dogma can sometimes obscure reality. While building homes remains big business, solving the American housing affordability crisis may require less focus on hammers and nails, and a much sharper focus on incomes, wealth distribution, and targeted financial relief for those who need it most.
