Income Needed to Buy a Home Nearly Doubles Since 2020

The income required to afford a median-priced home in the United States has nearly doubled since 2020, surging from $66,000 to over $120,000, according to a new report from the Harvard Joint Center for Housing Studies (JCHS). The “State of the Nation’s Housing 2026” report paints a stark picture of a housing market beset by high prices, elevated mortgage rates, slowing construction, and a deepening affordability crisis affecting both renters and homeowners across the country.

The Affordability Gap Widens

The numbers are stark. Monthly mortgage payments on a median-priced home have climbed to $3,100 in the fourth quarter of 2025, up from $1,700 in early 2020. Existing home prices have risen 54% since 2020 and now stand at roughly five times the median household income — well above the ratio of three times that prevailed in the 1990s, as Fox Business reported.

Both new and existing homes now carry median prices above $400,000, while mortgage rates remain above 6% as of mid-2026. Existing home sales are hovering near the lowest levels seen in three decades, first reached in 2023, though May 2026 showed a modest uptick to 4.17 million seasonally adjusted annual units.

Demand Dries Up as Economic Uncertainty Mounts

According to the Harvard Graduate School of Design, household growth has slowed sharply as weak labor markets, student debt burdens, and economic uncertainty make it harder for young adults to form independent households. Residential mobility has reached a record low.

“Although supply shortages are still a major concern, depressed demand became a headline in housing over the past year,” said Daniel McCue, lead author of the report, as quoted by Fox Business.

Employment growth has slowed dramatically from 1.5 million in 2024 to just 116,000 in 2025. Consumer confidence dropped by more than 20 percentage points in 2025 and fell further in early 2026 due to the Iran war, reaching an all-time low in April. “Without a job, graduates are less likely to form a new household or move to a new region,” McCue added. “Without confidence in employment, families are less likely to move or make a big purchase like a house.”

New construction starts dipped 1% over the past year, driven by a 7% decline in single-family starts, according to the report.

Homeownership Declines for Second Straight Year

The homeownership rate fell to 65.2% in 2025, marking the second consecutive year of decline. The drop was most pronounced among younger adults: just 37% of those under 35 owned a home in 2025, down from 39% in 2022, Multifamily Dive reported.

“Construction is down, home sales are flat and cost burdens are up,” McCue said during a panel discussion following the report’s release.

The Rental Crisis Deepens

The rental market faces its own severe pressures. A record 22.7 million renter households — 49% of all renters — were cost-burdened in 2024, spending more than 30% of their income on housing. Of those, 12.1 million were severely cost-burdened, spending over half their income on rent.

Meanwhile, the number of rental units available for under $1,000 per month (adjusted for inflation) plunged more than 30% between 2014 and 2024 — a loss of 7 million units. Chris Herbert, managing director of the Harvard JCHS, called this among the report’s most “shocking findings,” noting that these units have largely been “lost to inflation in a tight market.”

Federal rental assistance remains profoundly underfunded: only one in four very-low-income households receives a housing subsidy, leaving 13.8 million eligible households unassisted.

Policy Response: Regulatory Reform Without Direct Relief

The primary federal response has been the 21st Century ROAD to Housing Act, the most significant housing legislation in roughly three decades. Passed by the Senate 89-10 and the House 396-13, the bill focuses on regulatory reforms — limiting institutional investor purchases of single-family homes, streamlining environmental reviews, reducing manufactured housing costs, and encouraging small-dollar mortgages.

However, as scholars Kirk McClure and Alex Schwartz wrote in The Conversation, “As sweeping as the bill is, its impact is likely to be modest. The reforms do not address the main source of the nation’s housing problem: that millions of renters and homeowners lack the income necessary to cover their housing costs.”

HUD Secretary Scott Turner has emphasized deregulation as the administration’s primary strategy, arguing that regulations add roughly $100,000 to the cost of a typical single-family home. “When you tear down these regulations, you make it easier to build and easier to buy, and job pay goes up,” Turner told RISMedia.

What’s Next

The housing affordability crisis shows no signs of abating in the near term. With slow job growth, elevated interest rates, and depressed consumer confidence weighing on demand, and with the policy response focused on incremental regulatory changes rather than direct income support, the most cost-burdened Americans are likely to continue struggling.

States are beginning to take action on their own. Washington, Vermont, and Maine have passed sweeping zoning reforms to allow small multifamily buildings in single-family neighborhoods. Stockton Williams, executive director of the National Council of State Housing Agencies, noted that “states across the country today are taking unprecedented action on housing.”

Whether these state-level efforts, combined with federal regulatory reform, can meaningfully close the widening gap between incomes and housing costs remains one of the defining economic questions of the decade.