For years, the prevailing wisdom in the American real estate market has been defined by a single, undisputed crisis: a severe national housing shortage. Industry analysts, policymakers, investors, and media outlets have continuously sounded the alarm, arguing that millions of missing housing units are the primary engine driving skyrocketing home prices and out-of-reach rents. The solution, according to the standard consensus, is simple and absolute: build more housing.
However, groundbreaking research by University of Kansas Professor Emeritus Kirk McClure and Alex Schwartz has upended this foundational assumption. Their comprehensive analysis of U.S. housing markets from 2000 to 2020 concludes that most of the country actually possesses a sufficient total supply of housing.
Appearing on the On the Market podcast hosted by Dave Meyer, Professor McClure sat down to deconstruct the data behind their findings, explain how previous studies went awry, and offer a controversial perspective: America’s affordability crisis is less a product of missing bricks and mortar, and more a structural clash between stagnating lower-tier incomes and escalating prices driven by wealthy buyers.
Main Facts: What the Study Found
The core thesis of McClure and Schwartz’s research challenges the national narrative by looking at hard census metrics across a broad timeline. Rather than uncovering widespread deficits, the researchers discovered that the American housing stock has comfortably outpaced both population growth and household formation over the last two decades.
- Population vs. Housing Growth: Between 2000 and 2020, the U.S. population grew by approximately 17.8%. Over the same period, household formation grew at a slightly faster clip of 20.3%. Crucially, the total housing inventory expanded even faster, growing by 21.2%.
- The Micro-Level Reality: To ensure their findings weren’t skewed by dying rural areas or a handful of booming coastal cities—a phenomenon known as aggregation bias—the researchers analyzed nearly every county and metropolitan area in the United States. Out of roughly 900 metropolitan and micropolitan markets, after removing about 140 areas experiencing population decline, only 19 markets actually displayed a true housing shortage where production failed to keep pace with household formation.
- The Affordability Mismatch: McClure points out that the true crisis is concentrated at the bottom of the economic ladder. While the overall market has enough units, there is a severe deficit of units affordable to extremely low-income earners, compounded by wages that have failed to keep pace with the broader economy.
Chronology: How the U.S. Housing Market Reached This Crossroads
To understand how conventional wisdom became so detached from their empirical findings, McClure and Schwartz evaluated how different housing cycles and historical starting points skew data interpretation.
The 2000 Baseline vs. Post-GFC Perspectives
When McClure and Schwartz began their study, they initially operated under the assumption that the popular shortage narrative was correct. They hypothesized they would find acute shortages in "hot" markets on the East Coast (Boston, New York, Washington, Miami) and West Coast (Seattle, San Francisco, Los Angeles, San Diego). When their data failed to show this across the board, they grew skeptical of their own work and rigorously tested their models.
They chose the year 2000 as their baseline because it followed the 1990s—a decade characterized by balanced economic growth, solid wage expansion, and a close alignment between population, household formation, and housing production.
In contrast, major studies declaring a national shortage—such as those published by Freddie Mac—often use 2010 as a starting point. McClure argues that starting in 2010 introduces a statistical distortion. Coming immediately on the heels of the Great Financial Crisis and the bursting of the housing bubble, 2010 represented a market burdened by a massive surplus. During the preceding decade (2000–2010), the U.S. built roughly 140 housing units for every 100 new households formed to digest an oversupply.
While the post-2010 era did experience a slowdown in construction, McClure asserts that this slowdown was merely a natural and necessary digestion of the multi-million-unit overhang generated during the housing boom. When viewed across the full 2000–2020 window, production adequately matched or exceeded demand.
Supporting Data: Examining Competing Models
During the podcast discussion, Meyer and McClure analyzed alternative models put forward by major financial institutions, such as Moody’s analytics, which track household formation cohorts.
The Generational Headwinds of Gen Z
Moody’s research suggests that household formation rates—particularly for younger demographics like Gen Z—are currently lower than historical norms, attributing this suppression to a lack of available housing units.
McClure agrees with the nuance of tracking generational cohorts (recognizing that young adults aged 20 to early 30s are traditionally the primary drivers of new household formation as they leave home and enter the workforce). However, he fundamentally disagrees with attributing lower formation rates solely to a housing shortage.
Instead, McClure points to a web of broader socioeconomic pressures facing younger generations:
- Higher Education Debt: College costs have saddled young adults with unprecedented levels of student loan debt.
- Capital Barriers: High upfront costs make it difficult to scrape together the first- and last-month rent required to sign a standard lease.
- Underlying Economic Health: To secure a mortgage under strict banking guidelines (such as the standard 28/30 debt-to-income rules), gig work is insufficient. Younger buyers need steady employment, robust down payment savings, and manageable auto or student debt—prerequisites that have grown harder to achieve amid stagnating entry-level purchasing power.
Official Responses and Industry Pushback
Unsurprisingly, McClure and Schwartz’s findings have met significant pushback from real estate developers, financial analysts, and housing advocates. The commercial incentives to maintain the "shortage" narrative are powerful.
- The Homebuilder Perspective: Homebuilders naturally advocate for policies that stimulate production. As McClure noted, he has never met a homebuilder who believed there was such a thing as too much housing. If the federal government is willing to subsidize construction, builders are more than happy to break ground.
- The Low-Income Housing Tax Credit (LIHTC) Dilemma: Programs like the LIHTC pump between $11 billion and $15 billion annually into building affordable housing. However, McClure highlights a critical flaw: due to the soaring costs of labor, land, and financing, developers cannot make the math work for units priced at $500 to $700 a month for the truly destitute. Instead, LIHTC units frequently open at $1,200 to $1,400 a month, effectively serving middle-income households while displacing private-market development. Research indicates that for every 100 tax credit units built, roughly 85 market-rate units are displaced, resulting in a minimal net gain.
Implications: Rethinking Housing Policy and Federal Spending
If the nation does not suffer from a macro-level shortage of total housing units, the policy implications are profound. Pumping billions of dollars into blanket construction subsidies may be missing the mark, leading to overbuilding in middle-market segments while leaving vulnerable populations behind.
1. Shifting Focus from Bricks to Vouchers
McClure argues that federal dollars can be deployed far more efficiently by bolstering direct rental assistance programs, such as the Housing Choice Voucher (Section 8) program. Rather than paying developers to build expensive new middle-market apartments, rental assistance puts purchasing power directly into the hands of low-income families, helping them access existing housing stock. While the voucher program is currently expensive and underfunded (serving only a fraction of eligible households), expanding it would yield a higher return on investment than constructing more units that remain financially out of reach for the poorest Americans.
2. Wealth Stratification and the Tax Code
On the owner-occupied side, McClure questions the societal value of generous tax codes that treat primary real estate as a premier wealth-building vehicle for the ultra-wealthy. Current tax law shields the first $500,000 of capital gains on a primary residence from taxation every five years. While this provision offers vital protection to working-class families, proposals in Washington to raise this exemption further primarily benefit high-income, high-wealth households. McClure argues that these policies inadvertently fuel bidding wars and income stratification in desirable submarkets, artificially pulling up home values.
3. The Conundrum of the Middle Market
Addressing Meyer’s confusion over why prices in the middle-income rental market haven’t crashed despite rising multifamily supply, McClure notes that market adjustments often manifest through hidden channels, such as concessions (e.g., property managers offering free parking, waived fees, or promotional months instead of dropping headline rents). Furthermore, he warns that a dramatic 10% to 25% drop in housing prices, while theoretically comforting to affordability advocates, would trigger widespread defaults, foreclosures, and systemic instability across the nation’s real estate portfolios.
Conclusion
The research presented by Kirk McClure and Alex Schwartz forces a uncomfortable paradigm shift in American housing discourse. By untangling the myths of aggregate shortages from the realities of income inequality, their work suggests that solving the housing affordability crisis requires more than just building blindly. It demands targeted financial support for those at the bottom, a critical look at tax subsidies for the wealthy, and a recognition that the market’s challenges are rooted less in a scarcity of physical structures and more in the distribution of economic power.
