Builders in the US are adapting to the ongoing housing affordability crisis by constructing more high-density homes according to new analysis.
The latest analysis from Zillow shows that approximately 1 million single-family homes were completed in 2023, marking the second-highest annual total since before the 2007 financial crisis.
This represents an 11 per cent increase compared to 2019 levels.
To achieve this pace, builders have pivoted towards higher-density housing options.
Construction starts for detached single-family homes declined by nearly 9 per cent from 2022 to 2023, while starts for attached single-family homes rose by more than 3 per cent over the same period.
Zillow senior economist Orphe Divounguy said the persistent nature of the housing affordability crisis meant builders needed to adapt.
“The housing affordability crisis still grips America,” Mr Divounguy said.
“It was precipitated by decades of underbuilding, and despite builders’ recent efforts, the unmet need for homes is growing.”
The shift towards attached homes allows builders to overcome challenges related to land acquisition costs and provide more affordable options for buyers.
The median size of a new home remained steady at around 2,200 square feet, while the median lot area decreased by 700 square feet compared to 2022.
However, the overall pace of construction is slowing, likely due to reduced demand amid housing affordability challenges.
Construction began on 946,000 single-family homes in 2023, about 7 per cent fewer than in 2022 and 16.5 per cent fewer than in 2021.
Houston, Dallas, and Phoenix have issued the most single-family permits since 2020, potentially alleviating some affordability pressures in these high-growth markets.
The analysis also revealed that markets with faster-rising home values have seen a greater surge in permitting, on average.
This trend aligns with historical patterns of increased construction activity in areas experiencing stronger job and income growth Mr Divounguy said.
Mr Divounguy said it was important to promote higher density through local laws to address the housing shortage.
“The best long-term solution is more supply,” Mr Divounguy said.
“Builders are helping where they can by shifting to more cost-conscious and space-efficient designs.
“But promoting density through local laws is key – that will go a long way to bring in more affordable homes where they’re needed the most.”
