For years, the prevailing consensus among real estate investors, policymakers, and economists has been built on a single, alarming premise: the United States is suffering from a massive, multi-million-unit housing shortage. This narrative has driven urban planning policies, fueled institutional underwriting, and dominated political debates, suggesting that the only way to tackle soaring housing costs is to aggressively build more units.
However, groundbreaking research by Kirk McClure, professor emeritus at the University of Kansas, and his co-author, Alex Schwartz, challenges this foundational assumption. After a rigorous analysis of household growth and housing production across U.S. markets from 2000 to 2020, McClure and Schwartz concluded that most American metropolitan areas actually have an adequate supply of total housing.
In a revealing interview on the On the Market podcast hosted by Dave Meyer, Professor McClure broke down the data behind the headlines, explained why 14 million vacant homes don’t automatically solve the crisis, and argued that housing affordability is driven less by a scarcity of bricks and mortar and more by a structural mismatch between lower incomes and higher prices.
Chronology of the Research: Unraveling the Housing Stock Myth
When McClure and Schwartz embarked on their study, they held the same assumption as most of the real estate industry: that a severe housing shortage existed, particularly in high-demand "hot markets" on the East Coast (such as Boston, New York, Washington, and Miami) and the West Coast (such as Seattle, San Francisco, Los Angeles, and San Diego).
The Initial Hypothesis vs. Reality
The researchers set out to quantify this perceived deficit and trace how it translated into plunging affordability. To their surprise, they simply could not find the data to support their hypothesis. Skeptical of their own findings, they subjected their work to intense peer review and data verification.
Looking at decennial census data spanning from 2000 to 2020, the researchers tracked three vital metrics:
- Population growth: Grew by approximately 17.8%.
- Household formation: Grew at a faster rate of 20.3%.
- Housing stock production: Grew by an even faster rate of 21.2%.
"Housing stock grew faster than household formation, which grew faster than population," McClure explained. "That makes it a little hard to square with the notion of a shortage."
Eliminating Aggregation Bias
To ensure their nationwide numbers weren’t being skewed by declining Rust Belt cities or stagnant rural micro-markets, McClure and Schwartz analyzed every single county and metropolitan area in the United States individually.
Out of roughly 900 metropolitan and micropolitan markets, they filtered out about 140 areas experiencing population decline—such as New Orleans. Out of the remaining 760-plus growing metropolitan areas, only 19 actually suffered from a true housing shortage, defined as housing production failing to keep pace with household formation over the two-decade span.
Supporting Data: Why Baseline Years Matter
A major point of contention in modern housing economics is when to start measuring inventory deficits. Prominent studies—most notably from Freddie Mac—have concluded that the U.S. faces a shortage of several million homes. However, McClure points out that these studies often use 2010 as their baseline starting point.
The Great Financial Crisis and the Pre-GFC Glut
Choosing 2010 as a starting point captures the post-Great Recession recovery period, a time when construction plunged to historic lows. However, it ignores the massive overbuilding that occurred in the decade leading up to the 2008 crash.
From 2000 to 2010, the U.S. built roughly 140 housing units for every 100 newly formed households, creating a multi-million-unit surplus or "overhang" of vacant inventory. When measured across the entire 2000–2020 timeline, this massive glut smoothed out the post-recession slowdown, revealing that supply fundamentally kept pace with long-term demand.
The Moody’s Cohort Study and Gen Z Realities
Other notable models, such as research from Moody’s, track household formation rates across generational cohorts. These models argue that lower household formation rates among younger generations (like Gen Z and younger Millennials)—such as adults delaying moving out of their parents’ basements—are evidence of a suppressed housing market caused by a lack of available units.
While McClure acknowledges the nuance of cohort analysis, he attributes the stagnation of younger household formation to a broader array of economic pressures rather than just a lack of physical doors:
- High student loan debt and auto loans consuming debt-to-income ratios.
- Stagnant entry-level salaries and a lack of steady, W-2 employment required for mortgage underwriting.
- The high cost of upfront cash needed to secure a rental lease (first and last month’s rent plus security deposits).
"If more units were there, would Gen Z have a higher household formation rate? Probably marginally," McClure noted. "But what really needs to happen is they need jobs, steady employment, and relief from underlying debt."
Official Responses and Competing Economic Theories
The publication of McClure and Schwartz’s research has sparked intense debate among economists, banking institutions, and policy wonks who advocate for drastically different federal interventions.
The Low-Income Housing Tax Credit (LIHTC) Dilemma
For decades, federal programs like the Low-Income Housing Tax Credit (LIHTC) have funneled billions of dollars annually into building subsidized housing. However, McClure argues that LIHTC has morphed into a surrogate middle-income housing program.
While low-income families desperately need units renting for $500 to $700 a month, newly constructed LIHTC units frequently rent for $1,200 to $1,400 a month. Furthermore, research indicates that for every 100 LIHTC units built, roughly 85 market-rate units are displaced, resulting in a very small net gain of housing targeted at a demographic that is already saturated.
The K-Economy and Rising Home Prices
If there isn’t a national shortage of physical units, why are home prices and rents so historically unaffordable?
Federal Reserve research points to aggregate wealth and income stratification. Wealthy households, buoyed by stock market gains and generous tax codes favoring primary homeownership, have driven up home prices in desirable submarkets. Because the Case-Shiller home price index closely tracks aggregate top-tier incomes, upper-middle-class and wealthy buyers have immense purchasing power that continuously bids up owner-occupied real estate.
Meanwhile, renters priced out of the homeownership market have flooded the rental pool, driving up rents faster than median renter incomes—even if aggregate unit supply is technically sufficient.
Implications for Future Housing Policy
If the traditional narrative of a physical shortage is largely overstated, how should lawmakers, investors, and developers adjust their strategies? McClure and his peers suggest a radical pivot in how public funds are deployed.
1. Shift from Construction Subsidies to Direct Rental Assistance
Because building new units at scale cannot economically bridge the gap for extremely low-income households, McClure advocates for expanding direct consumer subsidies, such as the Housing Choice Voucher (Section 8) program.
Getting cash assistance directly into the hands of low-income renters allows them to utilize existing housing stock already sitting on the market, achieving a much higher "bang for the federal buck" than building expensive new multi-family complexes.
2. Targeted First-Time Homebuyer Assistance
Rather than extending broad capital gains tax exemptions on home sales—which primarily benefit affluent homeowners sitting on hundreds of thousands of dollars in equity—policymakers should focus on tools that assist low-income, first-time buyers. This includes loan-to-value adjustments, down payment assistance, and mortgage insurance products designed to smooth out irregular income shocks for working-class families.
3. Re-evaluating Real Estate Portfolios and Underwriting
For real estate investors and developers, McClure’s research serves as a warning against blanket assumptions. While high-growth pockets will continue to see localized demand, overbuilding in the middle-market rental sector risks pushing vacancy rates higher, leading to increased reliance on leasing concessions (such as free parking or months of free rent) to attract tenants.
Conclusion
The debate over the American housing market is far from settled. While the instinct to reach for hammers and nails remains politically popular, Professor Kirk McClure’s research forces a sobering realization: the crisis we face is not a simple math problem of missing physical structures.
Instead, it is a complex economic challenge rooted in income inequality, wage stagnation, debt burdens, and geographic stratification. Addressing affordability will require policymakers to look past blunt force construction mandates and focus instead on targeted financial relief for those who need it most.
