Declining Affordability in Rural U.S. Housing Markets
In a recent brief published by the Council of Economic Advisers (CEA), the deterioration of housing affordability in rural America has been highlighted as a pressing issue. The brief reveals that housing supply falls short of demand, combined with rising costs, restrictive local regulations, and economic pressures unique to rural areas, are the key factors contributing to this issue.
The severe shortage in overall housing supply, with a national gap of over 4.5 million units, impacts rural markets as well. This limited supply drives up prices and reduces the availability of affordable options. High interest rates and increased construction costs also inflate the price of new home building, making housing development financially challenging in rural communities.
Zoning laws and local regulatory barriers hinder new construction or the conversion of existing structures, restricting housing production. Rising insurance costs and risks from natural disasters, especially affecting rural areas, lead to housing losses and higher costs for rebuilding or insuring homes.
The economic squeeze on low-income rural residents is another significant factor. Wages have not kept pace with housing costs, requiring many to spend disproportionate income shares on housing—sometimes more than 30% of their earnings, which is considered cost-burdened. Limited access to affordable financing and housing assistance programs in rural zones, compared to urban centers, further exacerbates the issue.
These challenges compound to create an urgent housing affordability crisis in rural America, as much as in urban areas. The bipartisan ROAD to Housing Act of 2025 seeks to address this issue by expanding affordable housing supply through various means, such as increasing low-income housing tax credits, easing zoning restrictions, supporting multifamily and rural housing, and improving access to financing for low-income homeowners.
The graph in the brief presents a stark comparison of real income growth and housing cost growth for rural renters and homeowners since the year 2000. Real rural house prices have risen at a pace more than 6 times faster than homeowner incomes. Rural rents increased by 31.2% between 2000 and 2023, while the median real income of rural renting households only rose by 5.5%. The graph suggests that the need for additional housing supply in rural America is urgent to improve housing affordability.
The upper-right figure in the brief focuses on the comparison of real rural house prices and homeowner incomes between 2000 and 2023. The plot shows a marked deterioration in housing affordability in rural America. For rural households aged 31-35, the fall in homeownership rates between 2000 and 2023 is 3.2 percentage points. Similarly, for rural households aged 36-40, the decline in homeownership rates is 3.8 percentage points.
The graph also indicates that income growth in rural America has not kept pace with the increase in housing costs. This discrepancy underscores the need for integrated policy solutions addressing both supply and demand to restore affordability in rural America.
- The shortage in rural housing supply, resulting from limited construction due to zoning laws and regulatory barriers, high insurance costs, and risks from natural disasters, intensifies the housing affordability crisis in rural America.
- The escalating housing costs and stagnant incomes in rural America, as indicated by the graph, demonstrate the urgent need for bipartisan policies like the ROAD to Housing Act of 2025, which aims to increase affordable housing supply and improve access to financing for low-income homeowners.
