Most analysts believe part of the reason for the housing crisis is that there were too many homes in the U.S. before the crisis. The oversupply eventually led to the price crash and the broader financial crisis. This study paints a different picture. It uses Census Bureau data to conclude that there was an undersupply of housing before the crisis, and that undersupply continues.
The Census data provide surprisingly little support for the claim that there were too many homes in 2005. Figure 3 provides a couple of hints about how policymakers came to believe that housing supply had been excessive and why, in fact, supply has actually been constrained. The number of single-family home starts, especially single-family homes built for sale, did rise to unprecedented levels. That is a high-profile category, where publicly traded homebuilders operate and where many families become new homeowners.
But the other categories were either stagnant or in decline over the long term. The growth in single-family homes built for sale came mostly by taking market share from the other types of units.
What caused this shift? The other categories face increasing regulatory hurdles: most notably, obstacles to housing expansion in several urban centers where many multi-unit properties would normally have been built.