The U.S. housing shortage has hovered in the millions for years — and despite waves of construction, shifting migration patterns and a growing push to loosen restrictive local zoning rules, the gap hasn’t meaningfully narrowed.
What’s changing now is how some housing experts explain why.
A new report from the Center for Public Enterprise on multifamily housing argues project approvals aren’t the only hurdle — many developments simply aren’t getting built because the financing doesn’t work. To close the gap, the report estimates the U.S. would need to increase multifamily construction from roughly 350,000 units per year to about 500,000 annually, sustaining that pace for roughly a decade.
Estimates vary widely depending on how housing need is defined and measured, but Paul E. Williams, executive director of the Center for Public Enterprise and author of the report, places the supply gap at roughly five million homes.
“There are a lot of different ways of measuring it, but most estimates fall somewhere between about 1.5 million and 7 million homes,” Williams told Inman. “We tend to take the midpoint.”
It’s not just zoning — deals have to pencil out
For years, the housing shortage has been framed as a zoning and land-use issue, with local governments often blamed for restricting supply. Williams doesn’t entirely disagree, but says the reality is more complicated in practice.
“Zoning is a big part of it, but the financing piece is core — especially for multifamily,” he said.
Unlike single-family homebuilders, who can often scale production and sell homes individually, multifamily developers rely on more complex financing that’s highly sensitive to interest rates and investor demand. A typical project might require a bank loan covering around 60 percent of costs, with the remaining 40 percent raised from equity investors — a structure that has become increasingly difficult in today’s higher-rate environment, Williams said.
“If you have market-rate projects that don’t pencil during a housing shortage, there’s obviously something wrong with the investment environment,” he added.
That dynamic is playing out across the country. Even as metros across the country — including in states like California and Illinois — move to loosen restrictive zoning, housing starts haven’t kept pace.
“They’re creating new zoning capacity,” Williams said. “But you still need investment to fill that container.”
The report points to past periods when federal policy helped unlock that investment environment — including the late 1960s, when new financing tools like mortgage-backed securities expanded liquidity for housing, and the early 1980s, when tax changes made multifamily development more attractive.
The result in both cases was a sustained increase in apartment construction, something Williams said is essential today.
“The challenge isn’t just getting the line to go up,” he said, referring to long-term construction trends. “It’s getting it to go up and stay up.”
The report additionally points to a range of federal policy changes aimed at improving the economics of multifamily development, from expanding construction lending to adjusting tax incentives to attract more capital — the same kinds of tools that helped drive sustained building booms in past decades. Without those kinds of changes, Williams said, it will be difficult to sustain the level of building needed to close the gap.
What agents should watch and where they can have influence
For agents and brokers, the implications are already showing up in the form of constrained inventory and uneven supply across markets. The report argues that the development pipeline is already robust, with a backlog of projects that could move forward if financing conditions improve.
“If financing improves, a lot of that pipeline can come online,” Williams said.
In the meantime, smaller and less capital-intensive projects are more likely to move than large, institutional developments that depend on more complex financing structures. The shift also reinforces the growing importance of multifamily construction — particularly in urban and high-demand markets where single-family development is limited.
“If a lot of the shortage was created by restrictions on multifamily, then more of what needs to be made up is going to be multifamily,” Williams said.
That has implications not just for developers, but for the broader real estate industry, including agents navigating tight inventory and advising clients on where supply may emerge next. While national policy changes around financing will ultimately play a major role, Williams said industry professionals can still help shape the conversation.
Williams said trade groups like the National Association of Realtors have increasingly started to engage on supply issues in recent years, driven in part by pressure from agents themselves.
“Agents who recognize this as an issue should absolutely tell their local Realtor association they care about it,” he said, “and want the chapter to be more involved in improving the policy environment and housing supply.”
