A common claim in discussions of the housing market is that the United States suffers from a severe housing shortage. Housing construction fell sharply during the late 2000s housing bust, and over the past two decades, rent inflation has been substantially higher than overall inflation. Recent data from the American Community Survey show that close to half of renters and a quarter of homeowners can be classified as “cost-burdened,” meaning they spend more than 30 percent of their income on housing. But while high housing costs suggest a shortage of homes, quantifying this shortage is difficult, as different methods generate sharply different results. This session will discuss the best ways to measure the housing shortage and assess its impact on various demographic groups. It will also explore the implications of predicted future demographic trends for the size of the housing shortage and whether it is possible to accurately assess the housing shortfall in specific parts of the country.

After World War II, productivity in home construction surged, enabling millions of Americans to move into single-family homes. However, beginning in the 1960s, this productivity growth stagnated, and since the 1990s, it has declined in absolute terms. Goolsbee and Syverson (2023) note that while total factor productivity for the overall economy has more than doubled since 1950, it has remained essentially flat in home construction. This session will examine the economic and structural factors behind the stagnation of construction productivity, analyzing labor market dynamics, industry organization, regulatory impacts, and measurement challenges. Presenters will explore whether productivity metrics accurately capture improvements in housing quality and investigate the role of skill shortages, fragmented supply chains, and risk aversion in limiting efficiency gains. The session will also consider macroeconomic implications of construction productivity trends for housing supply and affordability as well as the capacity for future innovation and change.

The question of how housing supply responds to fluctuations in demand has become a central topic in housing research. When a local labor market booms, the economically efficient outcome typically is an increase in that area’s population. But this process can be short-circuited by zoning restrictions that limit new housing construction or by a lack of suitable land on which to build. What does recent research say about the quantitative importance of zoning, land scarcity, and other impediments to new construction and conversions of nonresidential properties? Moreover, unresponsive housing supply has often been viewed as a more significant problem in high-cost coastal markets. Is there evidence that inland housing supply has become less responsive to demand over time? And how can policymakers balance potential tension between encouraging an adequate supply of affordable housing and maintaining local control over housing policy?

What are the most important challenges facing the U.S. housing market, and how are those challenges affecting New England? This panel of regional housing-market practitioners will explore the day-to-day realities faced not only by the firms that finance and build housing in New England, but also by the families who want to live here. Panelists will highlight areas where policies could have the greatest impact in improving housing outcomes in our region.

The title of a famous 2007 article by the late Edward Leamer put it bluntly: “Housing IS the Business Cycle.” Although residential investment is typically less than 5 percent of GDP, fluctuations in residential investment have accounted for much greater shares of GDP movements in recessions. Additionally, the housing market is a key channel for the transmission of monetary policy to the wider economy. Lower interest rates not only spur housing investment, they also contribute to higher asset prices—including house prices—with potential knock-on effects on consumption. This session will investigate the evolution of housing’s relationship with the macroeconomy over the past 30 years. Is the relationship between housing and the business cycle still as strong as when Leamer wrote his paper? Have recent changes in housing finance affected the way that monetary policy affects the housing market? What insights have we gained about the housing market and economy through the recent tightening cycle?

Current measures of housing inflation rely primarily on weighted averages of rental costs, but whether this approach is appropriate for setting monetary policy remains contested. With approximately two-thirds of Americans owning homes and many renters aspiring to homeownership, traditional rent-based housing inflation measures may not adequately capture housing-cost-related price pressures faced by most households. For renters planning to purchase homes, these costs include home prices and mortgage interest rates—factors largely absent from conventional housing inflation metrics. This measurement challenge becomes more pronounced with changes in mFonetary policy because interest rates directly affect homeownership costs but may not be reflected in rent-based price indexes. At the same time, some economists make a more fundamental critique of current housing-inflation measures. In particular, they argue that housing should be excluded entirely from inflation measures due to its highly inelastic supply. This session will examine these measurement challenges and their implications for inflation and determining appropriate monetary policy.