Population growth might be slowing, and more apartments and homes are going unsold and unoccupied. But that doesn’t mean the nation’s affordability challenges are getting better.

Depressed demand and harsh affordability challenges are the defining stories of 2026, according to the Harvard Joint Center for Housing Studies’ latest State of the Nation’s Housing report.

For years, the solution to the U.S. housing crisis was simple: We just needed to build more. But the frenzied bidding wars of the early 2020s have given way to a more complex reality. Today, construction is up and population growth is down, yet the average American is still locked out of the market.

The data shows a market in transition: While a post-pandemic building boom is finally forcing luxury landlords and high-end homebuilders to slash prices, it’s doing virtually nothing for the working class. That mismatch explains why the data looks so contradictory right now.

Many headlines draw attention to the top-line concern that the daily costs of owning a home are increasing. And yet the housing finance world seems to be showing an affordability picture improving for people, said Chris Herbert, managing director of the Harvard Joint Center.

“We’re getting closer to the point where markets seem to be in balance,” Herbert said on a webinar discussing the report. But that doesn’t mean the housing crisis is easing. Instead, the market is flooding at the top end.

Structural challenge

Housing affordability has continued to worsen in the country this year, despite slowing population growth driven by declining birth rates and immigration enforcement, Harvard found. And that is in spite of some hopeful signs in the market, says Daniel McCue, the lead researcher on the report.

The number of household formations declined for the fourth straight year in 2025 to just over 1 million. That’s the lowest level since 2017. McCue says that plays out as young people take longer to buy a home, and cost-burdened homeowners forgo moving to more expensive homes.

Existing-home sales have remained flat since 2023, and the inventory of new units for sale has steadily risen since then. That’s despite builders offering buyers more incentives.

Close to half of all renter households pay an outsized portion of their income on rent. Cost burdens, though, are now rising the fastest in the middle-income sector—households that make $45,000 to $75,000 a year, Harvard found.

Middle-income earners can’t afford the market-rate units flooding the market. Instead, they’re seeing the trend of fewer affordable units available to them.

The National Low Income Housing Coalition’s report earlier this year notes that the nation needs 7.2 million for-rent units, given the 11 million low-income people in the country. Meanwhile, the share of homes affordable to the median income has been cut in half since 2019.

Those trends compress low- and moderate-income people into fewer affordable units while builders deal with excess inventory on the top end, Herbert said.

“It’s not just about overall units; it’s about units at different price points,” Herbert said. “Even if we get to a place where we have enough supply overall, we still don’t have enough housing that’s affordable to people at the lower end of the income distribution.”

Positive trends don’t equal affordability

Homebuilders are slashing prices in many cities. Rental unit vacancy rates have rebounded from 6% in 2021 to close to almost 8% now, thanks to a post-pandemic apartment building boom. Harvard thinks the shortage of units needed for rent, which topped 1.5 million in 2022 and 2023, will shrink to 700,000 over the next decade.

“It’s a different problem than building more; it’s about how do we get more housing that’s affordable,” Herbert said. “So we need more affordable rentals, we need more starter homes. I think we need to shift the conversation about supply to not just overall supply but supply at what price point, and for whom.”

Nonprofits that own a lot of affordable housing also see the impact.

Marietta Rodriguez, CEO of NeighborWorks America, says affordable housing deals have declined by 60% in a decade.

“We are building many more class A-type units because they pencil out,” says Sharon Wilson Géno, president of the National Multifamily Housing Council. “Unfortunately in this cost and interest rate environment, while we all see the demand at the lower- and moderate-income sector, without increased subsidy, those units don’t economically work.”

Meanwhile, Géno says, highest-income renters “have never been so comfortable.”

Momentum builds across the nation

State and local efforts to remove housing barriers and increase development of cheaper and smaller units are a hopeful sign, McCue says.

That includes efforts to allow accessory dwelling units in more areas that didn’t allow them before. It also includes wider acceptance of manufactured and factory-built homes as affordable housing. It also includes more multifamily housing in commercial zones, something several states have pitched.

Harvard ultimately found that the best answer to solving the housing shortage is every idea all at once. Zoning reforms and laws allowing denser housing help. So do local and federal policies to cut the cost of building new homes. So does more financing from the public sector and capital markets to preserve existing housing.

“The problem has become so significant and so ubiquitous, that it’s leading to creativity,” Herbert said.

Older Americans are forced to navigate a series of serious financial challenges compounded by their needs for both housing and later life care. While home equity can certainly be a beneficial tool for some seniors to deploy, it will not always be a definitive answer for every senior’s needs.

This is according to Jennifer Molinsky, project director of the “Housing an Aging Society” program at Harvard University’s Joint Center for Housing Studies (JCHS) in an interview with NextAvenue.

Published on the heels of JCHS’ “Housing America’s Older Adults 2023” report from December, the growing number of mortgage products available to a wider swath of American seniors could make a difference for those aiming to age in place.

As noted in that report, however, older Americans are hesitant to tap their home’s equity for a variety of reasons, including leaving it in reserve to protect against an unforeseen economic shock or to leave to an heir.

“But what constitutes an emergency?” Molinsky told NextAvenue. “If you could use your home equity to make your life better — to buy hearing aids, for example — maybe that’s a good investment.”

But equity is not a resource that every older American has access to. Roughly two percent of older renters have the same level of wealth as older homeowners according to JCHS data, and there remains a pronounced gap between homeowners of color and their white counterparts, as noted by NextAvenue.

“Having less equity limits your options,” Molinsky told the outlet.

Additional funding for programs that can facilitate home modifications can also make a big difference for senior homeowners’ quality of life, Molinsky said.

Over the past couple of years, the U.S. Department of Housing and Urban Development (HUD) has shown that it’s paying attention to the emerging housing needs of an older population by creating programs that allow for age-minded home renovations.

HUD issued $15 million grants in mid-2022 and early 2023 designed to help with health and safety home repairs for low-income seniors.

“By 2040, it is estimated that 20 percent of the population will be over 65 years old,” said HUD Secretary Marcia Fudge in August 2022. “We must allow our nation’s seniors to age in place with dignity. This funding will give seniors the flexibility to make changes to their existing homes — changes that will keep them safe and allow them to gracefully adjust to their changing lifestyles.”

Other recent data suggests that home renovations may come with a burdensome economic cost for older Americans, amplifying the potential importance of assistance programs that can help seniors age in place.

Reverse mortgage companies have also invested in their own home modification programs. Before their merger, both Finance of America Reverse (FAR) and American Advisors Group (AAG) had explored different options in the modification arena, with FAR acquiring a home modification lending platform that continues today.

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