The American housing affordability crisis has changed dramatically over the past thirty years, now affecting a far wider range of households than ever before. Once considered a problem limited to low-income residents in major cities, the crisis now affects middle-class families with six-figure incomes in regions across the country. Rising costs, stagnant wages, and supply constraints have made it increasingly difficult for moderate-income earners to find affordable homes, a reality reshaping the national housing debate.
Marc Norman, Associate Dean at NYU’s Schack Institute of Real Estate, has spent decades developing affordable housing, syndicating tax credits, and studying housing policy. He describes a clear shift since the late 1990s: “When I started, the crisis was really one of our big cities affecting people at the lower income spectrum,” Norman says. “Now we’re seeing the housing crisis pretty much everywhere, bleeding into what we used to call middle-income. In cities like Denver, Seattle, and Dallas, families making over $100,000 are eligible for affordable housing programs and are rent burdened.”
Middle-Income Homes Struggle
Several factors have combined to push housing out of reach for the middle class. The most significant is a chronic undersupply of new housing. Over the past four decades, the pace of housing production has slowed, even as demand has grown in both urban and suburban markets. At the same time, wage growth has stalled for most Americans, failing to keep up with the soaring costs of land, construction, and insurance.
“Incomes over the last 20 to 30 years have been pretty flat, especially in the middle to lower income ranges,” Norman notes. “Meanwhile, housing costs, construction costs, insurance, and other soft costs have increased exponentially.” The numbers are telling: with average construction costs now around $350,000 per unit nationwide, a household needs to earn $85,000 to $100,000 to afford newly built housing at today’s prices. This leaves many middle-income families unable to afford homes that match their needs and incomes.
Land costs also play a major role, often making up 30 to 40 percent of total development costs in many markets. In response, some cities—such as New York—are mapping publicly owned land to identify opportunities to reduce expenses by developing on government-owned sites, thereby bypassing high land acquisition costs.
Disappearance of Affordable Housing Types
Another major driver of today’s affordability crisis is the loss of flexible housing types that once provided affordable options for newcomers and working families. After World War II, American zoning and building codes became much more restrictive, freezing out many forms of low-cost housing.
Historically, Norman explains, “Housing traditionally would flow—the mansion became the rooming house, the rooming house became the multifamily development. There was greater fluidity in how people could change their use depending on how they were living. Post-World War II, we froze a lot of types and didn’t allow that flexibility anymore.”
Single-room occupancy buildings, rooming houses, granny flats, and garage apartments—once common in American cities—are now illegal to build in most jurisdictions. This shift removed important entry points for people moving to cities or starting on their own. “People new to a city had a place to land with affordable rent while they got on their feet and saved money,” Norman says. “There’s a list of about 40 housing types that could not be built today that are illegal to build. A lot of those were the ways affordability presented itself—not with subsidy, not through regulation, but just through the ways things were built and rented.”
What’s Working
Despite these barriers, some cities have made progress by reforming zoning rules and encouraging the return of missing housing types. Minneapolis stands out as a leading example. The city eliminated single-family zoning in most neighborhoods, thereby permitting duplexes and triplexes in areas where only detached houses had previously been permitted. This change increased housing supply and helped stabilize or even lower rents, according to Norman. “You saw more construction, and you saw relatively stable to decreasing rental rates,” he says. This experience indicates that greater flexibility can increase supply and improve affordability without relying entirely on subsidies.
Other cities are following suit. Los Angeles adopted a small-lot ordinance that permits single-family lots to be redeveloped into four- to eight-unit structures. Florida’s Live Local program and similar efforts in other states are pushing for more flexible zoning and building codes. These policies aim to expand the range of housing options available to middle-income families.
Innovations in Design and Construction
Developers are also finding new ways to build affordable housing by rethinking design and construction. Norman cites the work of the architecture firm SO-IL and the developer Tankhouse, which have built several projects that eliminate interior corridors in favor of external walkways. This approach reduces construction costs and enables more efficient apartment layouts that provide better natural light and ventilation.
“You’re saving money on interior space and giving views, light, and air to the apartments,” Norman explains. One recent project in Brooklyn’s Gowanus neighborhood uses this model, delivering 120 units—20 percent of which are affordable under the city’s inclusionary zoning rules.
Some developers are bypassing traditional affordable housing programs entirely, instead focusing on building market-rate housing at lower costs. By simplifying layouts and using cost-saving construction techniques, they can offer rents below market averages without relying on government subsidies. Norman sees this as a positive trend: “We’ll always have the capital-A affordable housing programs, but it’s good news seeing developers figure out how to make housing more affordable through reducing construction costs or rethinking layouts and configurations.”
Policy Changes
One area of policy innovation involves building codes. In the United States, most multifamily buildings are required to have two stairwells and two means of egress, which increases costs and often leads to awkward unit layouts. In contrast, many countries permit single-stair buildings, which are less expensive to construct and provide better light and ventilation.
Recent code changes in some U.S. jurisdictions are beginning to allow single-stair buildings for certain projects, which could significantly reduce construction costs while creating more livable apartments. “People have been saying the U.S. is pretty unique in mandating two means of egress, which adds costs and creates weird configurations,” Norman says. These reforms could help make mid-rise apartment buildings more affordable for both builders and tenants.
A Multifaceted Path Forward
Norman argues that there is no single solution to the housing affordability crisis. Instead, cities and states need to try a range of approaches, reforming zoning, modernizing building codes, encouraging innovative design, and using public land. “There’s not one answer to the housing crisis,” he says. “Seeing 15 to 20 different approaches in different jurisdictions, thinking about how to tackle this differently, is going to create lessons for lots of people.”
The key lesson from recent success stories is that increasing housing supply and allowing a broader mix of housing types are essential to restoring affordability for the middle class. When regulations are relaxed and innovative building solutions are permitted, the market can respond by offering more options at lower price points.
For real estate professionals, these changes represent both challenges and opportunities. Understanding how regulatory reform, new construction techniques, and alternative development models can address affordability will be critical for serving a wider range of buyers and renters in the years ahead.
Looking Ahead
The spread of the housing crisis to middle-income families underscores the urgency of new solutions. Norman’s analysis suggests that a combination of thoughtful policy reform and innovative development can help close the affordability gap. By learning from cities that have succeeded in expanding supply and reducing costs, policymakers and industry leaders can begin to restore the housing market’s ability to serve Americans all across the income spectrum.
As the housing crisis continues to evolve, the willingness of cities and developers to experiment with new approaches will be crucial. The future of affordable housing depends on breaking down outdated barriers and creating a more flexible, responsive system, one that can meet the needs of today’s middle-class families and adapt to the challenges ahead.
