Housing Misalignment In America

What we say is a housing affordability crisis in America is actually a misalignment between the system that delivers housing, and the people that buy and rent their products.

Source: gettyimages.com

I often frame issues and events in a Midwest/Rust Belt kind of way that allows me to understand them better. When I think of today’s housing affordability crisis, I’m reminded of the American auto industry’s response to higher gas prices in the 1970s.

For almost three decades after World War II, cheap gas for automobiles was the expectation. Detroit’s Big Three (General Motors, Ford and Chrysler) held a tight grip on the domestic automobile market, and there was no incentive to change much of anything about their cars. They produced cars that appealed to all parts of the market, for luxury buyers as well as budget-conscious ones. The quality and efficiency of what they produced? That mattered less than production and sales.

Until gas prices rose dramatically. The 1973 oil crisis began when the Organization of Arab Petroleum Exporting Countries (OAPEC) instituted an oil embargo targeting the U.S. and other countries that supported Israel in the Yom Kippur War. Within six months, the price of a barrel of oil had nearly quadrupled (from $3 a barrel in October 1973 to $12 a barrel in March 1974). That increase was immediately reflected in the prices that American consumers paid at the pump, and it caused consumers to consider other options.

My father bought a 1974 Honda Civic at that time. I remember it being regarded as an oddity when I was a kid, but my father told people how much money he saved on gas. My father was an early adopter to the smaller, fuel-efficient cars being produced in Japan, at least in Detroit. But he, and others, were willing to acknowledge a change in the economy that the Big Three did not. Another oil crisis in 1979, resulting from a drop in oil production due to the Iranian Revolution, saw prices quicky rise again and consumers taking action by buying smaller cars produced overseas. Throughout much of the 1980s, sales of foreign automobiles accelerated in the U.S. The Big Three lost its dominance on the domestic market, and the American auto industry’s global influence and manufacturing employment has been in decline ever since.

Maybe, just maybe, the YIMBY (Yes-In-My-Back-Yard) movement should be regarded in the same way that the introduction of Toyota and Honda vehicles was perceived in the 1970s.

YIMBY success

Since its inception in the 2010s, the YIMBY (Yes-In-My-Back-Yard) movement has made great strides in raising awareness about the nation’s housing supply and lack of affordability. Early efforts emerged in California to counter the local anti-development sentiment (NIMBYs, or Not-In-My-Back-Yard) found in many municipalities by pushing forward statewide initiatives that mandated upzoning (allow denser development) near transit stations, effectively ending single-family home zoning in much of the state by allowing as many as four units on a single-family lot, and expediting permits for “missing middle” housing.

Their activism quickly spread to other states impacted by high housing costs, particularly on the east and west coasts, and been successful. Ten days ago, the YIMBY movement had perhaps its greatest accomplishment (with little fanfare) as the 21st Century ROAD to Housing Act became federal law without the president’s signature. It signals that the federal government recognizes the need for federal action to increase housing supply and reduce regulatory delays that drive up housing costs.

I’ve had my doubts about YIMBYism, though, mostly because of where I’ve lived my entire life – in the Midwest. When I first heard of YIMBYism, I was critical because I felt it didn’t address the concerns of cities like Chicago, Cleveland, Detroit, Milwaukee and St. Louis, for example, which have had chronically inexpensive housing (relative to the coasts) because of changes in the global economy that eroded the region’s manufacturing and industrial advantage. My position was similar to the one found in this quote, below:

“YIMBYs simplistically concluded that the housing market needed to be flooded with more apartments, and that would ultimately drive down rents. They knew developers built almost exclusively luxury housing, and that was okay with them. YIMBYs insisted that more luxury housing would solve California’s housing affordability crisis. From the get-go, YIMBYs embraced trickle-down economics or what’s now called “trickle-down housing” policy. As middle- and working-class people have long known, trickle-down anything doesn’t work — except to make the rich richer.”

My concern was that cities in the Midwest, lacking the development pressures and high prices apparent on the coasts, would vastly increase luxury housing within cities, without much consideration to city neighborhoods and suburban communities that are still recovering from deindustrialization. I saw this as something that would increase economic and social inequality in places that were already profoundly unequal. I made peace with the YIMBY movement, however. I recognized there needed to be action in the coastal cities, and it was the appropriate strategy for them, if not for the cities I’m most familiar with in the Midwest.

Do we have an housing affordability crisis, or a housing misalignment problem?

Looking back on the movement’s success has made me pose another question. Would the YIMBY movement have had earlier and greater success if it reframed its position on housing? What if is focused on the misalignment of American housing, rather than a crisis resulting from an absolute lack of housing?

I thought about this as I read Bill Fulton’s article on the number of extra bedrooms across the country:

“We have a shortage of housing in the United States and housing prices went up a lot.

But at the same time, it turns out that we have a lot of extra bedrooms. In fact, we have 137 million extra bedrooms.

But we’re not using the bedrooms to house people. We’re using them as storage, as guest rooms, and increasingly post-pandemic as home offices.

The bottom line is that even as our housing crisis grows, we’re building fewer houses. And they tend to be bigger houses for affluent people, who are older and don’t move very often.

The traditional turnover in housing has almost completely stopped and that’s leading to less housing opportunity, especially for younger folks and people of modest incomes.”

Last week I came across a fairly new Substack by Mike Hathorne. Hathorne has written a book on this, called The Great Housing Reversal and the New American Dream. For a quick explanation, see this quote from his Substack:

“For decades, the American housing system was organized around a narrow assumption: the standard household was a married couple with children, living in a detached single-family home, dependent upon two cars, and separated from daily needs. That model shaped zoning, financing, infrastructure, consumer expectations, homebuilding, school siting, retail development, and the mythology of the American Dream itself.

But the country has changed. The housing delivery system has not changed with it.

The U.S. Census Bureau now reports that married couples represent 47 percent of U.S. households, down from 66 percent in 1975. One-person households now account for 29 percent of all households. Among married-couple households, only 37 percent include their own children under 18. That is not a minor demographic footnote. It is a structural shift.”

This point dramatically shifts how we view the nation’s housing problem. Now we’re talking about how we are failing to meet the housing needs of today’s households. We have a national housing misalignment, not an affordability crisis. And we’re making it worse.

Housing misalignment in Chicago

This is a sentiment that has much wider application to many more cities nationwide. Let me explain by introducing a few interesting facts about Chicago.

Anyone who knows about American cities knows Chicago is the strongest of the “legacy cities” that were reliant on manufacturing and industrial employment throughout the 20^th century. That said, Chicago was deeply impacted by changes in the global economy that started in the 1970s and continue to this day.

By 1950, Chicago’s position as the nation’s freight hub and food processing center allowed the city to reach its population peak with 3.62 million people. In the subsequent decennial censuses, Chicago lost people at the rate of almost 5% per decade through 2020, when its population was 2.75 million. Chicago lost population in five of the seven Census periods, adding new residents in 2000 (4.0%) and in 2020 (1.9%). Overall, between 1950-2020, Chicago lost population at a rate of 3.7% per decade, losing at a rate of 10.7% in the 1980 Census alone. In 70 years, Chicago lost 24.2% of its residents, or nearly 875,000 people.

A look at occupied dwelling units in Chicago tells a different story. In 1950, Chicago had 1.07 million occupied dwelling units. By 2020 Chicago had 1.14 million occupied dwelling units, a modest gain of 6.5%. That 2020 number represents the highest number of occupied dwellings in Chicago’s history at the time; it’s also a number that continues to rise, with 1.16 million as of 2025.

Yet there are many who will say that people, especially young adults and young families, are being priced out of Chicago. It’s too expensive. How does that square with the fact that Chicago lost nearly a quarter of its population, and still has more housing units than ever?

Easy. In 1950 the average household size was 3.39 people. In 2020 it was 2.41. Average household size dropped 29% over the 70-year period. How did that happen? Fewer family households, many more single and two-person households. For all its multifamily density along the city’s lakefront, Chicago’s interior neighborhoods have lots of single-family homes that don’t appeal to what buyers and renters are looking for – smaller, affordable, modern-or-updated features and amenities. Possibly close to transit, definitely safe and comfortable, with good schools.

But let’s also look at the smaller households that now are prevalent throughout the city. Of course, there are young singles living in mid-rise and high-rise buildings, or in 2-flat or 3-flat buildings scattered across the city. But there are also seniors living alone in houses far too big for their current needs.

What’s worse is that many of these homeowners are looking to sell for high prices they may never be able to cash in on, because they don’t recognize their home is obsolete in today’s housing market.

Realigning our communities

If you’re seeking the chief culprits of the misalignment, look to the NIMBYs who saw development that wasn’t single-family home development as a threat to their property values. Blame zoning boards and plan commissions of years past. Blame developers who first seek to produce housing for those at the highest end of the income and wealth spectrum. Blame banks for not moving away from their models for successful and profitable investment.

The nation has been changing for decades, but the system that creates housing in America is far behind.

Many people will regard any changes to our current housing system as an attack on suburban-style development. It isn’t. It should be considered an acknowledgment that all our communities, urban or suburban, are maturing. We need a mix of housing types that all communities should include.

But I will acknowledge that larger cities are ahead of suburban municipalities on the realignment curve. Many cities have a 30, 40 or even 50-year head start on redevelopment projects formerly misaligned properties (vacant factories, for example) that were turned into residential sites. Cities will use that to their advantage as realignment continues.

I’d also acknowledge that in the end, suburban communities will be more impacted by the changes the misalignment created. Some suburbs will expand housing types; some will not. Some will survive, even thrive, without expanding housing types; others will not. In fact, even some places that we regard as cities today will reveal themselves as mostly suburban in character. Some will expand housing types; others will not.

Get ready for some interesting years ahead.