U.S. Housing Shortfall Persists Amidst Declining Permitting Rates, Estimated at 2.5-5.5 Million Units

A recent social media post from prominent online commentator Todd Davis has drawn attention to the ongoing housing supply challenges across the United States. In a tweet, Davis expressed strong concern, stating, > "This has to be a mistake. We have hardly built ANY market rate housing." His comment underscores a persistent issue in the U.S. real estate market, where new construction has struggled to keep pace with demand.

Despite recent construction efforts, the U.S. authorized approximately 1.5 million new housing units in 2024, a figure that aligns with pre-2008 averages but remains significantly below the estimated national housing shortfall. Experts place this deficit between 2.5 and 5.5 million units, indicating a substantial gap between available housing and population needs. This underbuilding has contributed to an ongoing affordability crisis, particularly in high-growth metropolitan areas.

Further compounding the issue, national permitting rates for new homes have declined. In 2024, the rate stood at 10.1 units per 1,000 existing homes, a decrease from 11.7 units in 2022. This slowdown in authorizations suggests a potential future constraint on housing supply, even as the need for more units remains critical. Construction timelines have also lengthened, with delays occurring both before and during the building process.

While housing starts saw a 5.2% increase in July 2025, reaching 1.428 million units, this growth was primarily driven by multi-unit housing. The broader residential construction market continues to face significant headwinds, including skilled labor shortages and volatile material costs. These factors contribute to increased building expenses and can slow the pace of new developments.

The U.S. Department of Housing and Urban Development (HUD) reported that the national sales market became "slightly tight" in 2023, influenced by higher mortgage rates that dampened buyer demand. Conversely, the rental market has shown signs of softening, with an estimated vacancy rate of 8.9% as of January 2024, up from 7.5% in 2020. This increase in rental vacancies is partly attributed to a record high in permitted rental units in the years following the pandemic, leading to increased supply in that segment.