As the problem of housing affordability worsens across the country, higher-density development such as townhomes can open the door for many prospective home buyers.

Lexington Homes

The nation’s housing affordability crisis might very well come to a head this year with Not In My Backyard proponents facing off against the foot soldiers of the Yes In My Backyard movement.

So how did we get to this point? A shortage of housing inventory, a deepening construction labor shortage and high land costs are fueling the crisis, according to Robert Dietz, chief economist for the National Association of Home Builders.

“Affordability is getting worse,” he said. “We’re definitely in the first half of it.”

The NAHB/Wells Fargo Housing Opportunity Index shows that the peak of housing affordability was reached in 2012 when 78% of new and existing home sales were affordable for a typical family based on their incomes and current interest rates. By the third quarter of 2018, that score of 78 had plummeted to 56, meaning only 56% of home sales were affordable.

NAHB’s projections show that in 2019 the index is likely to fall below a level of 50.

The rise in home prices and mortgage rates has led to the monthly mortgage principal and interest payment rising more quickly than family income, eroding home buyer affordability.

Dietz says numerous potential home buyers retreated from the market in the second half of 2018 when mortgage rates neared an average basis of about 5%. The ongoing growth in home prices has hamstrung the demand.

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“We have multiple years where home price growth was rising faster than income growth,” Dietz said. “That was occurring because there was a lack of resale inventory as well as a lack of new construction inventory, which in turn was caused by a labor shortage, lack of housing lots and other kinds of higher construction costs. So it’s been on this kind of a slow decline. 2018 was the year where there was a really noticeable effect on housing demand.”

Low-cost rental housing also is becoming increasingly hard to find. While renters’ median housing costs rose by 11% between 2001 and 2016, their incomes fell by 2%, according to Harvard University’s Joint Center for Housing Research.

“Typically, people will rent before they buy,” said Dietz. “If rents are high and the rental market is tight, then it becomes harder…