Residential construction and government projects have declined after U.S. construction spending dropped by 0.6% in December, the U.S. Department of Commerce reported Monday, March 4. The setback followed a 0.8% rise in spending in November.
The Commerce Department reports that residential construction dropped by 1.4% and spending on government projects declined by 0.6%. These numbers reveal the ongoing struggles in the housing sector and the declining activity in federal, state, and local activity.
One of the struggles in the housing sector include the gap in the supply of affordable housing. According to CBS, even neighborhoods in the U.S. with the lowest rents are experiencing issues with affordable housing supply.
Ben Austen, author of High-Risers: Cabrini-Green and the Fate of American Public Housing, says the state of affordable housing isn’t good.
Austen researched Chicago’s personal battles with affordable housing and estimated the city would need 348,000 affordable housing units. The city has a supply shortage of 119,000 of those units.
“There’s a huge deficit of affordable housing,” said Austen. “Housing is so fundamental in everything you do: to health, to work, to schooling.”
These numbers aren’t unique to Chicago. According to the National Low Income Housing Coalition, no state in the U.S. has an adequate supply of affordable rental housing for their lowest income renters.
The U.S. has a shortage of up to 7.2 million rental homes that are considered affordable to renters whose income is at or below the poverty guideline of their area. Only 35 affordable rental homes exist for every 100 low-income renter.
In 2015, median-priced properties were $143,000 on average, but that number jumped to $155,000 in 2017.
Although this price jump may have come from new installations such asphalt shingle roofs, which have an ROI of 62%, or ducted HVAC systems, which are installed in 90% of new homes, the $12,000 price hike is largely due to low housing supply and high demand.
Construction spending for 2018 was at an all-time high with spending increasing by 4.1% to $1.3 trillion. But despite the record-breaking spending, the 4.1% gain is considered the lowest performance since spending fell 2.6% in 2011.
The last time construction spending hit a record high was in 2006 when spending hit $1.16 trillion. This was considered the peak of the U.S. housing boom before sales declined in 2007 in the face of the recession and a five-year pause in construction spending.
Construction activity started increasing again in 2012 and surpassed the 2006 high in 2016. But after a gain of 11% in 2014 and an increase of 10.7% in 2015, spending jumps have slowed down over the last three years.
The steady growth of rent while affordable housing shrinks has led an estimated 11 million U.S. families to spend half of their income on rent.
Rob Dicke, the executive director of the housing authority in Dane County, WI, says the average cost of a two-bedroom apartment in his county is $1,091 a month. A worker making minimum wage would need to work three full-time jobs to afford that apartment, he says.
“There is no county in the U.S. where you can work a minimum wage job and afford a two-bedroom apartment,” said Dicke.