Housing crisis

The housing crisis is getting worse, how to fix it?

  • The housing crisis could affect 1.6 billion people by 2025, according to the World Bank.
  • Shortages of land, loans, labor and materials are some of the factors fueling the housing crisis.
  • The world needs to build 96,000 new affordable homes every day to house the nearly 3 billion people who will need adequate housing by 2030, according to UN-Habitat.
  • Efforts to build more affordable homes are underway in countries like the United States, India, Scotland and Africa.

Housing is a basic human need. But the lack of affordable homes to buy or rent is fueling a global housing crisis.

By 2025, 1.6 billion people are expected to be affected by the global housing shortage, according to the World Bank.

In most countries, the cost of housing has risen faster than incomes, according to data from the International Monetary Fund.

In a study of 200 cities around the world, 90% were found to be unaffordable, with average housing costing more than three times the average income.

The United States alone is short of 1.5 million homes, according to a study by financial research firm Moody’s Analytics. The country has fewer homes for sale or rent than at any time in the past 30 years, according to the study, Overcoming the Nation’s Daunting Housing Supply Shortage.

Most countries have seen housing costs rise faster than incomes.

Image: IMF

What caused the housing crisis?

A shortage of land, loans, labor and materials since the 2008 financial crisis are the main causes of the housing shortage in the United States, according to the Moody’s study.

This has driven up costs and reduced the profit margins builders can make. They have less incentive to build more homes, “especially low-cost housing with lower margins, says Moody’s Analytics.

COVID-19 is considered to have worsened the housing crisis as buyers and renters sought more space during the closings. Historically low interest rates in many countries, which make it inexpensive to borrow money, have fueled this phenomenon.

A graph showing the housing supply in the United States

Many US states are experiencing housing shortages.

Image: Moody’s Analytics

What are the impacts of the global housing crisis?

Home prices around the world rose at their fastest pace in 40 years as demand outstripped supply, according to research by financial services firm JP Morgan.

Rents are also soaring. In Europe, for example, rents for all housing types rose 14.5% in the first three months of this year, according to HousingAnywhere’s International City Rent Index.

In Asia, home to some of the world’s most expensive and fastest growing housing markets, renters spend more than half of their income on housing costs, according to the Rent Cost Index, which compares the average cost of housing. a three-bed house in more than 50 countries.

About 11 million Americans also spend more than half their income on rent.

How does rising housing prices affect people?

Rising housing costs mean people have less money to spend on other basic needs, like groceries, bills, transportation, and family care. It is therefore more difficult to get out of it.

Unaffordable housing also fuels homelessness. According to UN-Habitat, the United Nations program for human settlements and sustainable urban development, around 100 million people in the world are homeless. And a quarter live in conditions that are detrimental to their health, safety and prosperity.

When housing costs rise, it also drives up inflation — the price of goods and services — and depresses economic growth, the White House says in a new housing policy statement.

Lack of affordable housing forces low-income workers to live farther from their jobs, “requiring long and expensive commutes and reducing productivity,” Moody’s Analytics says in its study.

How are governments dealing with the housing crisis?

The world needs to build 96,000 new affordable homes every day to house the nearly 3 billion people who will need adequate housing by 2030, according to UN-Habitat.

The organization says its advice has helped 43 countries improve their housing policies.

For example, one of its programs helps countries with urban planning. Countries with huge influxes of migrants and refugees – including Cameroon, Egypt and Jordan – are among its beneficiaries.

Japan has done very well in providing affordable housing, even in major cities, according to the Center for Cities, a UK think tank. Simple planning laws promoting needs-based development and favorable property taxation are part of its approach.

In the United States, the government is committed to closing the housing shortage in the United States within five years. His plans include incentives to relax state and local land use laws and regulations that limit housing density. Other plans include introducing new ways to finance housing construction.

In Scotland, the Scottish Government plans to increase housing supply by 2040 through policies including a range of funding mechanisms to build affordable housing.

In India, a new construction system that uses low-cost prefabricated panels made from waste materials has been approved by the government and is expected to reduce the cost of building houses.

Other initiatives include the development of 3D printed homes in Africa, Mexico, India, Europe and other regions. 3D printing can produce high quality homes much faster and cheaper than traditional construction.

While investable real estate has grown by more than 55% since 2012 (PwC), the COVID-19 crisis has exposed weaknesses in human and planetary health as well as drastic inequalities, stark reminders of the influence of the built environment on societies and the vulnerabilities that exist in times of crisis regarding the performance of spaces.

Image: PwC

As the real estate sector looks to recovery, the need for transformation is clear. Portfolios need to be rebalanced and troubled assets reallocated. Technology must be fully embraced, and sustainability and well-being must be at the heart of design and operation. The affordable housing crisis that already existed before COVID-19 must be systemically addressed to ensure access to adequate and affordable housing. If the real estate sector is to transform, it is more important than ever to ensure that policies, financing and business solutions are aligned to deliver better buildings and cities.

The World Economic Forum has brought together real estate industry CEOs to develop a framework for the future of real estate to help drive the industry’s transition to a healthier, more affordable, resilient and sustainable world.