LEILA FADEL, HOST:
In the early 2000s, the U.S. had a housing glut that led to a bust in home prices and contributed to the great financial crisis a few years later. Today we have the opposite problem - not enough homes. But figuring out how big the shortfall is - it's complicated. Here are Wailin Wong and Adrian Ma from our Planet Money podcast, THE INDICATOR.
WAILIN WONG, BYLINE: David Wessel studies fiscal and monetary policy at the Brookings think tank.
DAVID WESSEL: I kept hearing people on the campaign trail throwing out all these numbers about how many houses we were short - 1.5 million, 3.8 million, 5.5 million.
ADRIAN MA, BYLINE: David looked into where these numbers come from. And he says a common approach to coming up with the housing shortage number is to use something called the vacancy rate.
WESSEL: You take all the housing units in the United States - apartments, single-family houses, townhouses. And you say, from government surveys, what percentage of them are vacant.
MA: Now, that might sound pretty straightforward. But David says it's not clear-cut what counts as a vacant home. Like, think about a vacation home.
WESSEL: Some of the estimates count, you know, the cottage on the lake that you only use six months a year. If they do their survey in February and it's empty, they count it as vacant.
MA: But other estimates leave that lake cottage out of the equation. Another example of an ambiguous case is a house that's vacant but unavailable.
WESSEL: Let's say your mother died and you're still cleaning out the house. So there's nobody living there, but it's not available for sale or rent.
WONG: So just this first step in quantifying the housing shortage - calculating the current vacancy rate - can be tricky. The next step is comparing the current vacancy rate to a historical vacancy rate that's considered normal. If the current rate is lower than the so-called normal rate, that is considered an indicator of a housing shortage.
MA: But, as David explains, determining the normal rate opens up another can of analytical worms.
WESSEL: What is a normal or healthy vacancy rate isn't fixed in time. So think about this - we have a lot better listing services on real estate, and you can do a lot of shopping online. So maybe houses stay vacant less often because it's easier, thanks to the technology, for a buyer and seller to find themselves. So you might, over time, see a falling vacancy rate. And these estimates kind of ignore that possibility.
WONG: Big players in the housing industry use the vacancy approach as the basis for calculating the size of the housing shortage. But David says variations in how they crunch the vacancy numbers sometimes result in different figures.
MA: So we get all these different estimates for the housing shortage, which could make you think, like, OK, well, what's it all for? And David himself actually questions the usefulness of a national number for the housing shortage because, well, he points out that housing largely is a local issue. So a national figure glosses over the differences in housing markets from state to state, city to city - sometimes even down to the neighborhood level.
WESSEL: If anything in the world is not national, it's housing. The policies we need are probably very much at the state and local zoning level. And so in some respects, the national thing is almost meaningless.
WONG: Bottom line - David says instead of focusing on vacancy rates, local or national, we should be looking at home and rental prices instead.
MA: Adrian Ma.
WONG: Wailin Wong. NPR News.
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