Across the United States, housing affordability has become an important economic development consideration. The availability and cost of housing can influence where families relocate, how businesses recruit workers, and how communities pursue new investment. A sufficient supply of housing at a range of price points may therefore support regional economic growth.
1. The Current U.S. Housing Shortage
U.S. home prices remain elevated, and housing affordability continues to be constrained in many markets. Limited supply is one contributing factor. Zoning rules, land-use restrictions, labor and material costs, permitting requirements, and other conditions can affect the pace and cost of construction.
Affordability pressures have persisted even as some market conditions have changed. According to the National Association of Realtors, the median existing-home price reached $440,600 in June, an increase of 1.8% from one year earlier.
2. How Housing Availability Can Affect Regional Economies
A limited supply of affordable housing can affect regional economic performance. These effects may be seen through changes in labor availability, migration patterns, household spending, and community appeal.
2.1 Workforce Access and Productivity
Housing availability can influence the relationship between employers and workers. When employees have difficulty finding suitable housing near employment centers, businesses can face a smaller accessible labor pool. Workers may respond by accepting longer commutes, spending a larger share of their income on housing, or moving to another area.
Employers may consequently experience recruitment challenges, turnover, absenteeism, or pressure to increase wages. Over time, housing conditions may also influence decisions about where companies locate, expand, or invest.
Research has linked higher housing costs with slower employment growth and lower labor productivity in some markets. Some companies have also cited housing costs as one factor in relocation or expansion decisions. However, such decisions are typically based on multiple considerations, including taxes, infrastructure, workforce availability, and operating costs.
2.2 Population Migration and Income Leakage
Housing costs tend to influence migration. Communities that generate jobs may still struggle to attract or retain residents when housing in the surrounding region is limited or unaffordable. Some workers and families may instead move to lower-cost regions, which can affect population growth and the future labor supply.
Critically, migration from communities can cause income leakage and wide-reaching economic effects. Workers may choose to earn wages in one region while spending much of their income on housing, retail, services, and investments in other regions with more affordable housing.
As a result, some of the economic benefits associated with those wages may accrue outside the region where they were earned. This shift in spending can reduce economic activity in the employment region, potentially spilling over to reduce local business activity and attraction, tax revenues, and regional economic growth.
2.3 Household Spending
While income leakage concerns spending outside a region, housing costs can separately reduce the total amount consumers spend anywhere. When households devote a larger share of their income to rent, mortgage payments, utilities, and related expenses, they may end up with less disposable income available for other goods and services.
Lower discretionary spending can affect local business revenue, employment, and income. The scale of these effects varies by region, household income, housing tenure, and broader economic conditions. Personal consumption expenditures accounted for approximately 68% of U.S. gross domestic product in the second quarter of 2026, underscoring the importance of household spending to the national economy.
2.4 Community Appeal
Housing availability and cost also shape a region’s appeal to live, not only its affordability. Communities that offer a range of reasonably priced housing options may be better positioned to attract remote workers, business starters, entrepreneurs, and retirees who are not tied to a single local labor market.
Furthermore, housing shortages can impact amenity investments near residential sections, reducing demand for parks, transit systems, bike trails, and other public facilities. This creates a feedback loop: greater appeal draws residents, and new residents help fund further amenity investments.
3.Federal Policy and Community Action
The 21st Century ROAD to Housing Act became law on July 11, 2026, following bipartisan support in Congress. The legislation is intended to address several factors affecting housing supply and access.
Key provisions include measures to:
- Restrict certain large institutional investors from purchasing additional single-family homes, subject to specified exemptions;
- Reduce some regulatory barriers to housing construction, including by expanding the federal definition of manufactured housing;
- Expand local lending opportunities for housing construction and mortgages;
- Provide guidance related to zoning reform; and
- Give community banks greater flexibility in deploying funding.
Representing a substantial federal housing policy initiative, the law’s effects will depend on implementation, participation by state and local governments, market conditions, and the response of developers, lenders, and other stakeholders.
These provisions are likely to interact with the same channels discussed above, from labor markets and migration to household spending and construction activity, though the direction and scale of those effects will vary by region.
As federal housing policies change, communities may benefit from evaluating housing conditions alongside workforce development, infrastructure, and population trends. Economic development organizations can use data and scenario analysis to assess local housing needs and the potential effects of proposed policies or investments.
Relevant questions include:
- How might additional housing affect employment, migration, population growth, and workforce availability?
- Which industries could be affected by changes in household spending or labor access?
- How might zoning changes, construction activity, and federal incentives affect economic output and tax revenue?
- How could these effects develop over five, ten, or twenty years?
- How might local income be affected by residents earning wages in one region while spending on housing, retail, and services in another?
The answers will vary by region and will depend on local housing demand, land availability, infrastructure capacity, financing conditions, and regulatory requirements.
4. How REMI Models Can Help
Housing affordability can interact with labor markets, migration, consumer spending, business investment, and public infrastructure. Because these relationships change over time, evaluating their potential economic effects may require more than a single-year projection.
REMI’s dynamic models allow decision makers to examine policy and development scenarios over time. The models can estimate how changes in housing construction, population, employment, consumer spending, infrastructure investment, and related factors may move through a regional economy.
Organizations interested in evaluating the possible effects of housing policies or infrastructure investments can learn more about REMI’s models or request a demonstration.
Related Resource
View REMI’s recent webinar on the regional economic effects of rising electricity demand. Large projects, including data centers, can create jobs and increase housing demand. At the same time, competition for land, labor, energy, and infrastructure may affect the pace and cost of residential development.