Urban Wire A New Tool Can Help Forecast the Housing Market
Margery Austin Turner, Daniel Teles
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A row of townhouses

The US faces a housing affordability crisis, housing markets are a “mess,” and there is “no silver bullet” fix. Policymakers looking for solutions face a serious knowledge gap. They can’t reliably predict how new investments or policies would ripple through local housing markets, how they would interact, and whether they would meaningfully improve housing availability, affordability, and equity.

We designed the Urban Institute’s new Housing Market Forecaster to help policymakers visualize the outcomes of their policy options and understand the trade-offs. The forecaster simulates the interactions between housing demand and supply within a metropolitan region to show what it would take to reduce housing hardship and narrow the profound racial and economic inequities baked into US housing markets. It produces estimates of 10-year changes in housing market outcomes based on expected changes in population, demographics, and incomes and possible policy interventions.

We implemented version 1.0 of the Housing Market Forecaster for the Washington, DC, region, which exemplifies the housing challenges of many high-cost markets nationwide. We tested a handful of demographic and policy scenarios and compared its predictions about the future of the DC-area housing market. The forecaster is still a work in progress, and its results are by no means definitive. But they offer some compelling insights into the DC region’s future.

1. What if income inequality increases?

We compared two demographic scenarios—one with an income distribution as it was before COVID-19 (using the 2019 American Community Survey) and a second with widening income inequality. With greater inequality, the forecaster predicts that wealthier and white households would choose to live in areas that are currently majority Black and where households have lower incomes. This shift in demand would push up housing costs in communities that are currently more affordable. At the same time, majority-white suburban areas would become more diverse and have fewer wealthy households.

2. What if population growth slows?

We explored the possibility that in the aftermath of COVID-19, fewer people who work in the DC region would live here because of their ability to work from home, cutting the expected growth rate for nonelderly households by half. The Housing Market Forecaster predicts that, even so, in communities with the highest housing costs and most affluent residents, vacancy rates would remain low—suggesting pent-up demand for these highly sought-after areas.

3. What if local leaders change land-use regulations to allow more new construction?

The forecaster includes a specialized module to estimate the number of new housing units that will be added over the next decade and the potential increase in new units if land-use regulations were reformed. Even if regulatory reforms allowed for more housing construction, the forecaster predicts that housing costs would continue to increase over the next decade. But the expanded housing stock would better serve all the households that want to live in the region, dramatically reducing both homelessness and out-migration to the exurbs. Compared with our “baseline” findings for 2029, this policy scenario also reduces average cost burdens (slightly) for households of color and households with the lowest incomes and enables more of them to choose high-opportunity areas of the region.

4. What if Congress expanded housing choice vouchers to serve more households?

The Housing Market Forecaster predicts that providing vouchers to all households with very low incomes would functionally eliminate housing insecurity and homelessness and significantly reduce racial and economic segregation across the DC region (assuming no landlord discrimination). Households with low incomes and households of color would gain access to historically wealthier, more expensive, and more exclusive communities. However, the forecaster suggests a substantial number of households would move to the exurbs in this scenario. Most of these out-movers would have incomes just above the voucher ceiling; the forecaster projects that the increased demand from voucher recipients would push up the prices of units these households would otherwise occupy, making the exurbs more financially attractive.

What’s next?

The Housing Market Forecaster is a promising tool policymakers can use to envision and prepare for a range of possible futures and assess the potential of housing policy reforms and investments. But it’s still a work in progress. We’re currently developing its ability to predict the size of changes on the horizon, and additional work is needed to further disaggregate by race and ethnicity. 

With an updated tool, we’re optimistic that DC-area policymakers—and, ultimately, those in other regions—can use the forecaster to help shape combinations of policy reforms and investments that make housing more affordable for everyone living and working in their region and begin breaking down long-standing barriers of segregation and neighborhood inequity.

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Research Areas Housing Greater DC
Tags Homeownership Housing affordability Housing markets Housing stability Housing vouchers and mobility Neighborhood change
Policy Centers Metropolitan Housing and Communities Policy Center
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