As Los Angeles grapples with devastating wildfires that have destroyed over 10,000 homes and businesses, a groundbreaking USC study reveals how today’s housing crisis was set in motion long before the first spark – through a cascade of policy missteps that have left America short 4.5 million homes and an entire generation struggling to find affordable housing.
The research, published in the Russell Sage Foundation Journal of the Social Sciences, traces how a series of well-intentioned but poorly timed policy decisions collided with demographic shifts to create what may be the most severe housing crisis in modern American history.
A Crisis Decades in the Making
“A tightly constrained housing supply reduces resilience to absorb losses from unexpected disasters — fires, earthquakes, hurricanes and more,” explains Dowell Myers, professor of policy, planning and demography at the USC Price School of Public Policy and the study’s corresponding author.
The study points to a critical miscalculation in the early 2000s: As easy credit fueled a housing bubble, policymakers and industry leaders failed to recognize that the smallest generation of young adults in 30 years was driving the market. When the bubble burst in 2008, the response would prove catastrophically mistimed.
Wrong Solution, Wrong Time
“These measures came at the worst possible time — just as millennials, the largest generation in 30 years, entered the housing market,” says Myers. “Young home seekers were welcomed with the lowest construction in more than 60 years.”
The research identifies several critical failures that compounded the crisis:
- Severe underestimation of millennial housing demand, which only became apparent after 2016 when pent-up demand surged
- Failure to account for demographic “age waves” as millennials reached home-buying age
- Misinterpretation of post-2008 declining homeownership rates as a permanent shift in preferences rather than a market response
Racial Disparities Deepen
The study reveals stark racial inequities in housing recovery. While Hispanic homeownership has largely recovered and Asian-American ownership has surpassed pre-crisis levels, Black Americans remain disproportionately impacted. By 2021, Black homeownership was still 16.3% below expected levels, having recovered only about 30% of losses from the Great Recession.
Climate Change Amplifies Crisis
As natural disasters like the Los Angeles fires become more frequent, the housing shortage leaves communities increasingly vulnerable. “In Los Angeles, this lack of flexibility could rapidly intensify gentrification as relocations strain the existing housing stock,” Myers warns.
Looking Forward
The researchers propose two key solutions: anticipating housing needs five years in advance to shorten the lag between rising demand and supply, and tracking population growth and housing availability together rather than separately.
“Without proactive policy, we risk not only falling short of meeting demand but also being unprepared with a resilient housing supply that can accommodate victims of climate-driven disasters, like wildfires, or other emergencies that create new demand in an instant,” Myers emphasizes.
As communities from Los Angeles to Miami confront increasing climate threats, the study suggests that America’s housing crisis isn’t just about affordability – it’s become a critical vulnerability in our resilience to natural disasters.