Recently, Housing Affordability Institute released the latest edition of its United States of Housing annual report, looking at the state of the housing market in 2025. The feature story looked at America’s declining housing production.
Since 2021, when housing permits had their post-Great Financial Crisis peak, total permits in the U.S. have fallen 18%. While some markets have been more stable than others, the recession in building comes just as the national political conversation has centered on housing reform.
Underbuilding Reemergence
Today’s housing shortage didn’t appear overnight. Following the Great Financial Crisis, homebuilding slowed, staying depressed for years. Even as the overall economy recovered and demand for housing returned, production never returned to the pre-GFC level needed to keep pace with a growing population and the formation of new households.
This underbuilding created a deficit that compounded over time. Every year, the country builds fewer homes than it needs; the shortage grows larger, making the next year’s challenge even harder to solve. As inventory tightens, prices rise, first-time buyers are pushed further from homeownership, and existing homeowners stay put because there are too few replacement homes available. The housing affordability challenges facing the country today are the result of years of producing too few homes, a trend that began two decades ago and has yet to be fully reversed.
Reforms Are Beginning to Show Results
It is still early, but the first wave of housing reforms is beginning to produce encouraging results.
Montana is one example. After the state enacted the “Montana Miracle” package of land use reforms in 2023, the median closing price of a new single-family home has fallen 21% from its peak, while single-family permitting has begun to recover after a steep decline from 2021-23.
That does not mean the work is done.
Housing reforms often spend years in litigation, and implementation can be just as important as passage. Earlier this year, three years after its passage, the Montana Supreme Court upheld those reforms. In Texas, lawmakers are now examining how some municipalities have attempted to work around the intent of the 2025 reforms by imposing new local requirements that increase construction costs.
Nationally, one trend also stands out. Since 2021, permits have declined across every major housing category except one: two-unit homes. Duplex construction has increased while single-family, three-to-four-unit, and larger multifamily housing have all moved in the opposite direction. That is hardly a coincidence. Duplexes have been at the center of many of the land use reforms adopted over the past several years.
Pressing Forward To Adequate Supply
Housing policy rarely changes markets overnight. But the early evidence suggests that when states remove barriers to building homes, production begins to respond. The question is whether more states are willing to follow.
