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Here’s a look at the residential construction industry. All numbers are rounded slightly.
Currently for 2024, residential construction spending is $940 billion/year, 43% of all construction. Only 60% of that ($560 billion) is spending on new housing units.
Currently for 2024, residential construction supports 3,350,000 jobs. Only 60% of the jobs (2,000,000) are for new units.
30 years ago residential construction spending was $550 billion/year and there were 2,200,000 jobs. On average over 30 years (including all up or down years) we’ve added $14 billion/year in spending and 38,000 jobs per year.
The 30 year (1995-2024) average growth in residential spending, counting only 21 up years, (eliminating all 9 down years) is +$36 billion/year. There were 2 years that we added +$70 billion/year in spending (one of those in 2021) and including those, there were only 7 years over +$50 billion/year.
The 30 year (1995-2024) average growth in residential jobs, counting only 21 up years, (eliminating down years) is +125,000 jobs/year. In 1999, we added 270,000 residential jobs. Since 2011, the most we’ve added is 170,000 in a year (2021).
In 30 years, we’ve never added more than $70 billion/year in residential construction spending nor more than 270,000 residential jobs in a year. Since 2011, the most spending increased was $70 billion in a year and the most jobs increased was 170,000 residential jobs, both in 2021.
Only 60% of all residential spending and jobs is associated with building new housing units. The other 40% is renovations, not associated with new construction. That must be considered when reviewing all the historical data noted above. So the following is just to look at the data without renovation.
Reducing the data by 40% to eliminate spending and jobs associated with renovation and look at just the data associated with building new housing units: In 30 years, we’ve never added more than $40 billion/year in residential construction spending on new units nor more than 160,000 residential jobs in a year. Since 2011, the most spending increased was $40 billion in a year and the most jobs increased was 100,000 residential jobs, both in 2021.
If we were to match the maximum growth rates since 2011 (and in the case of spending, since 1994) we would increase residential units construction spending by $40bil/$560bil = 7% and we would increase residential jobs by 100,000/2,000,000 = 5%.
The number of new housing units built in a year varies, but for this post I’ll use 1,500,000. Currently it’s a bit less than that. Increasing new units by 5% to 7% per year, on a base of 1.5 million units/year would net a growth of 75,000 to 105,000 added units per year. Let’s use 100,000 new units in the first year. We would increase that by another 100,000 in the 2nd year, and again in the 3rd and 4th years.
So we would increase new units by 100,000 + 200,000 + 300,000 + 400,000 or 1,000,000 total new affordable units over the next 4 years.
By this rough analysis, to increase new residential units by 3 million over current production over the next 4 years would require that we increase residential construction and jobs by 300% greater than the best performance ever achieved in the construction industry in the last 14 years, or even in the case of spending, in the last 30 years.
If a substantial portion of the current 1,500,000 unit production (500,000 units a year for the next 4 years) were shifted over to affordable units, the picture changes considerably. But I wouldn’t expect that current demand to just go away and shift to lower cost units.