At one time, the housing affordability crisis was associated with certain addresses. Often, they were in high-demand coastal cities and nearby communities.

Today, though, people from all corners of the country are dealing with crushing housing costs. In the latest episode of the Boston Fed’s Six Hundred Atlantic podcast, we examine the 2025 “The State of the Nation’s Housing” report from the Joint Center for Housing Studies of Harvard University.

Housing experts, including Boston Fed economist Paul Willen and Reserve Bank President and CEO Susan M. Collins, weigh in on what the crisis looks like for homeowners and renters and what can be done to ease the cost pressures.

Visit BostonFed.org to learn more about The State of the Nation’s Housing 2025 and check out material and videos from the event. For more interviews and analysis of the economy in New England and nationwide, visit BostonFed.org/SixHundredAtlantic.aspx. Subscribe to our email list to stay updated on new episodes.

Allison Ross:

At one time, the nation’s housing woes were associated with certain addresses.

It was often high-demand coastal cities and the surrounding communities.

Today, though, people from all corners of the country are shaking their heads at the crushing housing costs – and struggling to find relief anywhere.

The 2025 “State of the Nation’s Housing” report from Harvard University’s Joint Center for Housing Studies is filled with stats that indicate the nation’s housing woes are no longer localized. They’re spread all over.

The report, and a chance to explore what it reveals, brought together housing experts for an event in Boston co-hosted by eight Federal Reserve Banks.

And the new reality they discussed was unsettling to Clark Ziegler, executive director of the Massachusetts Housing Partnership, which supports affordable housing development.

Clark Ziegler:

I think what troubles me the most is how national the problem is. You convince yourself this is a coastal problem, this is a San Francisco problem, and a Boston problem. And the data today says something entirely different.

Allison Ross:

The headline stat from the Harvard report is that home prices are up 60 percent nationwide in just the last five years.

The report also tells us that the median price for an existing single-family home hit a new high in 2024 of more than $412,000. That’s five times the median household income.

And an increasing number of households are considered “cost burdened” by housing expenses. That means they spend more than 30 percent of their income on housing and utilities. In 2023, the number of cost-burdened renters hit a new high of 22.6 million.

Eric Belsky is the director of the Division of Consumer Affairs for the Federal Reserve Board of Governors. He said it’s been stunning to watch the problem get relentlessly worse.

Eric Belsky:

You may have a moment where the economy is doing particularly well, and a slight easing, but the path just seems to inch higher and higher, in terms of the proportion of people who are spending, when you think about it, half their income on housing. I mean it is truly shocking, and it’s really a challenge for the country and for the nation.

Allison Ross:

I’m Allison Ross, and this is Six Hundred Atlantic, a podcast produced by the Federal Reserve Bank of Boston.

This summer, the Boston Fed co-hosted the event where the annual Harvard report was released. The event was in Boston, but the Reserve Banks of Atlanta, Cleveland, Dallas, Minneapolis, New York, Philadelphia, and San Francisco all co-hosted.

This podcast episode is based on the discussion at that event. All the quotes in this episode were pulled from it – except for remarks from Boston Fed housing expert Paul Willen, whom we interviewed separately.

Housing issues are a huge concern at the Federal Reserve because they have such a profound impact on the economy. Boston Fed President and CEO Susan Collins gave this example.

Susan Collins:

So, during the mid-2000s boom, for example, housing drove over 17 percent of GDP growth. And in the subsequent collapse and recession, residential investment accounted for 40 percent of the contraction in output.

Allison Ross:

Collins also noted the Fed’s monetary policy, through which it sets interest rates, has a huge impact on the housing sector. A movement in rates can determine, for instance, whether builders will build, or buyers will buy.

Susan Collins:

When the Federal Reserve adjusts interest rates, housing typically responds first – and tends to spread the effects of monetary policy throughout the economy.

Allison Ross:

That goes both ways, of course. Lower rates and cheaper credit can spur buyers, sellers, and investors to increase activity in the housing sector. Meanwhile, higher rates can make housing less affordable and housing construction less attractive. It crowds out other basic expenses and causes families and entire regions to struggle.

Susan Collins:

But this affordability crisis extends far beyond individual hardship. It constrains labor mobility, it limits the ability of businesses to hire, it affects where businesses choose to expand operations, and it reduces the wealth-building potential that homeownership has historically provided to many American families.

Allison Ross:

Collins hears about the region’s housing woes all the time during her travels around New England. She said it helps her see housing data isn’t just data.

Susan Collins:

They reflect economic realities, often painful realities for many families, and real strain on people, on communities, and on places.

Allison Ross:

Collins said one obstacle when addressing the nation’s housing challenges is that they vary so dramatically across the U.S.

Susan Collins:

For example, we may see affordability challenges and supply constraints in cities, infrastructure shortages in rural areas, and zoning disputes in suburbs – or a mixture of all of these different challenges and others in a given area. So, clearly the national housing crisis requires local as well as national understanding and solutions.

Allison Ross:

A good example of the regional differences builders face is what they might encounter in heavily developed New England – as opposed to, say, the wide-open spaces of Texas.

Willen, a principal economist and policy advisor at the Boston Fed, says the mindset in Texas is that if you run out of room to build, you can just head for the highway.

Paul Willen:

They're always saying, you know, you want to build, you just go out one more exit, and you buy a thousand acres, and you start building there. Where can you find a place to build a thousand houses in New England?

Allison Ross:

New England also has a hilly, rocky terrain that it can be more expensive to build on. And its restrictive zoning laws limit the space for new housing. Overall, it’s tougher to create the housing supply that could push down prices.

But Willen notes that even though adding new houses is relatively easy in Texas, costs are up there as well. It all speaks to the complexity of a problem that isn’t easily diagnosed and won’t be easily treated.

Paul Willen:

It's not going to be something where there's some miracle cure that, you know, suddenly cures everything.

Allison Ross:

The Harvard report shows how extensive this housing cost crisis is. Here are some more numbers:

Home prices increased in 88 out of the top 100 largest metro areas. Meanwhile, sales of existing homes dropped to a 30-year low due to the high prices, high mortgage rates, and low inventories.

The average monthly mortgage to own a home also shot up last year – to 26-hundred dollars. That’s 11-hundred dollars more than just three years prior.

Senior research associate Daniel McCue at the Harvard Joint Center for Housing Studies put the difficulty of making that payment in perspective.

Daniel McCue:

To afford such a payment, a potential homebuyer would need over $126,000 a year.

Allison Ross:

With fewer homeowners, you tend to get more renters, and that’s exactly what has happened. Between 2019 and 2022, the renter population increased by an average of 171,000 annually. But last year, it increased by 848,000.

And the lowest-income of these renters are truly strapped: In 2023, renters with incomes below $30,000 had a median of just $250 left over per month after paying for housing.

Daniel McCue:

So that’s $250 to pay for food, for gas, for everything, let along savings. So that puts these households in a very precarious financial situation.

Allison Ross:

Jarrod Elwell, the community development manager at the Richmond Fed, said as housing advocates look for solutions, they have something they couldn’t necessarily count on before: everyone’s attention.

Jarrod Elwell:

I think it’s important to highlight how much of a priority housing is now as opposed to where it was maybe 10 or 12 years ago, too.

When we landed in a community 10 or 12 years ago, particularly urban communities, and asked the city to list its top-five list of priorities, they would have said, jobs, workforce, infrastructure, municipal finances, crime and public safety, schools. And housing may or may not have been on that top list of five.

We can’t land in an urban community now and have housing be lower than number two. Housing is near the top of the list, if not the top of the list, and what we’re seeing today is that is permeating into not just suburban, but rural communities.

Allison Ross:

Lydia Edwards is a Massachusetts state senator whose district includes parts of Boston and two communities just north of the city. As other areas of the country begin to grapple with the extent of the crisis, it all looks very familiar to her.

Lydia Edwards:

This is not new. This is … we are on fire and have been on fire for a long time in Boston.

Allison Ross:

So how to put out the fire? Even in a polarized time, there’s broad agreement that the housing cost crisis is a seemingly unsolvable problem that needs to be solved.

Ziegler said solutions can’t wait.

Clark Ziegler:

We have to be deadly serious about creating different options, disrupting this industry that honestly has been doing the same way for decades, if not half a century or longer. We have to find ways to meet people where they are, produce products they can afford, and shake up the system. And I think we’re just nowhere close to where we need to be in doing that.

Allison Ross:

Chris Herbert, managing director of Harvard’s Joint Center for Housing Studies, acknowledged that looking at the depth and complexity of the housing problem can be daunting and disheartening. But he added it’s necessary in order to come up with solutions.

Chris Herbert:

And so I think what we’re seeing is that this crisis is the mother of invention. So, I think that even though it’s kind of a dark time, there’s a time when there’s a lot of creativity flourishing, and I’m hopeful that good ideas will come out of that.

Allison Ross:

A critical part of taking on the housing costs crisis is understanding how it got to be a problem, and why it’s so acute now. There are, of course, many theories.

For example, some blame restrictive local zoning rules. They say they prevent denser development that could increase the housing supply and push down prices.

Others criticize the Fed and its recent monetary policy, which raised interest rates to tamp down spending and cool inflation. They say that exacerbated the existing cost pressures on the housing sector and made it even more expensive to buy a home and build homes or new rental units.

When Willen is asked, he focuses on two key trends – one long term, the other short.

The long-term trend is a mysterious 50-year drop in the productivity of home construction. During that time, worker efficiency has increased when building just about anything – from cars to cameras. But the opposite has happened in housing.

Paul Willen:

Yeah, so, in other words, per worker, the quantity of housing that you build has gone down. Per worker hour, we're producing less housing now than we did 50 years ago. And this is a big puzzle in the economics profession.

Allison Ross:

The shorter-term trend is an increase in building costs that began during the pandemic and still hasn’t leveled off.

Paul Willen:

The costs are going up. It's the cost of materials. It's the cost of labor. And all those things have just gone up dramatically in the last five years.

Allison Ross:

Willen says lower productivity and higher building costs have combined to jack up construction costs for every kind of housing. And he says that’s the engine behind the housing cost crisis.

John Barros, the managing principal of Boston-based Civitas Builders, said it’s been tough to navigate a building environment that’s both high cost and highly uncertain.

John Barros:

Frankly, the things that got done had to be almost perfect, perfect conditions. Don’t have any extraordinary costs, right? If we think about sort of the cost of money, and the cost of land, and the cost of construction, it leaves us with a need to do alternative thinking on each one of those sort of buckets, right, to really make this work. And that’s where I think we’re going to find some relief.

Allison Ross:

Willen says any solutions will work only to the extent that they make workers more productive and/or reduce construction costs.

And it turns out most proposed solutions can at least help with one or both of those goals. But will it be enough to matter?

One commonly discussed solution is modular homes and apartment buildings. That’s when the different sections of a house or building are built offsite in a factory and then assembled on the housing lot.

The purported benefits include the savings that come with mass production, including from bulk purchasing of materials. Also, fewer laborers are needed, and construction is generally faster.

Willen says modular use has shown it can save money, sometimes significant dollars. But it just hasn’t caught on broadly.

Turns out modular housing faces some of the same hurdles as traditional housing. For instance, there are complex regulatory requirements. Plus, moving large pre-fabricated house sections around is difficult. And there’s lingering skepticism about quality.

Paul Willen:

So, it turned out that factory-built housing has been more challenging than people thought.

Allison Ross:

But Willen says we still need to explore ways to expand offsite construction.

Paul Willen:

It seems so logical and so obvious that part of the problem with residential construction is everything is done on site. And so you can’t mechanize it and automate it the way you've automated car production, or steel production, or any of these things, where you can install lots of equipment and mechanize things and standardize and, you know, just churn out houses. And we haven't seen that. And so, I guess the question is, “What sort of things can we do to speed the process of adoption of new technology to home construction?”

Allison Ross:

If modular construction is about lowering costs by building housing differently, what about lowering costs by building different kinds of housing?

For instance, accessory dwelling units – also known as ADUs – are additional housing units built to accompany an existing home. It could be a backyard cottage, an apartment above a garage, or a basement apartment.

Housing advocates also talk about “cottage courts” in “pocket neighborhoods.” This is denser housing on smaller lots, usually built around a shared community space, like a garden or courtyard.

A theme among housing advocates – that’s seen in all these examples – is the desire to increase supply by building more housing in less space.

Elizabeth Kneebone, who works in community engagement at the San Francisco Fed, said the need for more housing in general bubbles up in different ways all around her district.

Elizabeth Kneebone:

But a thread that really runs through, I think, all of our work is concerns around housing supply constraints.

Reforms to local zoning laws in places from Maine to California have already cleared the way for more accessory dwelling units.

Another common call is for lower minimum lot sizes in local communities, to allow more houses to be built per acre.

In Massachusetts, the MBTA Communities Act requires local zoning changes to clear the way for new multifamily housing near subways and commuter rail stations.

But this act also offers an example of the stiff opposition to such efforts. Numerous communities have refused to comply with the act, saying the state has overstepped its authority.

Herbert warned that zoning reform can’t be seen as a cure-all.

Chris Herbert:

And I would just caution people to say we’re focusing a lot in this age we’re in on zoning reform. Is that important? Yes. Is that going to solve the problem by itself? No. And so we have to think about this in a very broad and complex way.

Allison Ross:

Amid talk about the urgent need for more housing, the Harvard report has some surprising stats that show supply has actually been increasing recently.

For instance, in 2024, there was a 7 percent increase in single-family home starts – which is the beginning of construction on a new building. Also, 1.02 million new single-family homes were completed in 2024. That’s on par with a 15-year high reached in 2022.

These new homes were also smaller and less expensive.

The median size of a new single-family home declined for the third straight year, to 2,150 square feet. And the median sales price of a new single-family home fell for the second straight year, to just over $420,000.

A striking stat on the rental side is that multifamily developers completed 608,000 new units in 2024. That’s double the average since 1990 and the most in nearly four decades.

Still, all that was absorbed by the massive new demand for rentals discussed earlier.

Fact is, these positive statistical trends aren’t yet making much of a dent. Collins said it’s a long road toward meaningful change.

Susan Collins:

Recognizing that the current crisis developed over many decades means that this will take time and persistence.

Allison Ross:

Boston Fed Executive Vice President Prabal Chakrabarti, head of the Bank’s community development arm, said we need to continue to attack the problem on multiple fronts.

Prabal Chakrabarti:

It’s such a large and diverse country, of course it wouldn’t be a one-size-fits-all, or one approach. It never has been, and, certainly, it won’t.”

Allison Ross:

Willen says patience will be needed.

Paul Willen:

It's a funny analogy, but … you know, with medicine, people always are looking for a kind of miracle cure. They're looking for a penicillin or something. But a lot of medicine progresses by coming up with treatments that improve one thing and improve another. And then suddenly you find after years that you've dramatically improved outcomes. But there's no single thing that you did. There's no magic bullet. There's going to be a kind of a very dogged, persistent attempts, and trying lots of different things, and getting incremental improvements across the board, rather than finding some miracle. I think that's basically what we have to do.

Allison Ross:

You can find more information about the housing cost crisis in the show notes. Subscribe to our mailing list and find interviews and seasons at bostonfed.org/six-hundred-atlantic. And don’t forget to rate, review, share, and subscribe to Six Hundred Atlantic on your favorite podcast app.

This episode was written by Jay Lindsay and edited by Amanda Blanco, Nick Brancaleone, Daniel Cooper, Lucy Warsh, and Paul Willen. Chief consultant was Paul Willen. Graphics and web design by Michael Konstansky and Michael Sorokach. Production consultants are Nick Brancaleone and Michael Sorokach. Recording and engineering by Steve Osemwenkhae. Project managers are Maureen Heydt and Peter Davis.

I’m Allison Ross, thanks for listening to Six Hundred Atlantic.