A growing number of policymakers are moving past failed demand-side fixes and focusing instead on the only lasting solution to the nation’s housing crisis: building more homes. From Washington to city halls across the country, new programs and zoning reforms are designed to expand supply after years of rising costs and stalled construction.
The shift reflects a broad consensus that affordability problems stem from scarcity, not a lack of incentives for buyers. Oxford Economics made this point in a recent research brief titled “Demand-side fixes won't solve housing affordability.” The group noted that households earning the median income have only 76% of what’s needed to buy a median-priced home, while more than half of renters now spend over 30% of their income on housing.
Persistent supply constraints have driven those numbers, Oxford and other analysts say. Construction costs jumped roughly 40% during the pandemic, according to government data, while land and material prices surged and developers struggled to make projects financially viable. Homeowners sitting on record-low mortgage rates have resisted moving, further restricting inventory.
Freddie Mac’s latest modeling underscores the scale of the challenge. Using a target vacancy rate of 12% — last seen during a stable housing period from 1994 to 2003 — the company estimates a significant shortfall in available units. The current rate stands at 10.3%.
“In the near term, we expect housing starts to still fall short of the amount needed to keep pace with household formation,” researchers wrote, citing the ongoing need to replace aging or lost housing stock.
Federal lawmakers have responded with new efforts to spur construction. The One Big Beautiful Act expanded the Low-Income Housing Tax Credit, increasing spending for affordable development and rehabilitation by an estimated 11% over 10 years.
The Senate passed the Renewing Opportunity in the American Dream (ROAD) to Housing Act of 2025, while the House is weighing its own Housing for the 21st Century Act — proposals that could form the basis for broader bipartisan agreement.
States and cities have been even more aggressive. California and Oregon eliminated single-family-only zoning, opening more land for multifamily projects. Massachusetts now mandates multifamily zoning near transit hubs, while Washington and Maine adopted statewide “missing middle” housing requirements.
Minneapolis and Portland, Oregon, both ended single-family zoning, with Portland now allowing up to four units on most residential lots. Austin has lowered minimum lot sizes and eased parking mandates, while Los Angeles’ streamlined accessory dwelling unit rules spurred ADU permits from just 100 in 2016 to nearly 7,000 by 2024.
Together, these measures mark a turn toward policies that address what economists call the root of affordability: not demand, but supply. As Oxford Economics and others have argued, more homes — not more subsidies — remain the surest path to lower prices and greater stability.
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