As housing prices continue to rise, many low- and middle-income households increasingly struggle to find options within their budget. But it’s not just potential homeowners — the ongoing affordable housing crisis is putting pressure on owners and investors, property managers, and renters alike.

So what’s the reason for this crisis? Here are some of the most influential factors, from the limited housing supply and rising building costs to issues with zoning and other regulations.

Ongoing Supply Shortages The housing shortage is not a new issue. In fact, buyer demand exceeding supply has been a consistent problem since the building slowdown that immediately followed the 2008 recession. It’s also important to note that the housing supply has failed to keep pace with population growth for most of the last 40 years.

While the true scale of the underbuilding issue is difficult to pin down, a 2021 report by Freddie Mac put the housing supply deficit at 3.8 million units, while a separate study published by the National Association of Realtors found a building gap of as many as 6.8 million units since 2001.

Rising Material Costs While softwood lumber has largely returned to pre-pandemic prices, and freight (particularly from Asia) has re-stabilized, the cost of many other necessary building materials continues to rise.

Ready-mix concrete, gypsum, and steel have all steadily climbed in cost since 2020, and paint used for interiors and exteriors has seen a particularly steep hike — roughly 33% and 50%, respectively, since the beginning of 2021.

Even where material prices have dropped, they aren’t always readily available, and many builders find it difficult to put together crews in the face of a growing labor shortage. According to Aaron Pachota, head of affordable housing at the NRP Group, “Wage growth will likely continue into the foreseeable future as employers compete for a very limited pool of workers. Companies will have to tackle these challenges until this shortage evens out, which we can anticipate will take a considerable amount of time.”

Restrictive Red Tape One of the biggest factors driving a lack of affordable housing options is the array of restrictive zoning laws and building regulations, including restrictions on square footage, building height, and specific exclusions for multi-family housing.

In addition to limiting the number of homes that are being built, these regulations can have a direct impact on the price of new housing. According to Wesley Doss of the Home Builders Association in San Angelo, Texas, “Building codes, energy codes, storm water runoff codes, they all affect the price of a home. So anytime you see regulations change, it almost automatically triggers a price increase.”

Ironically, these laws often end up being detrimental to the communities that put them in place. In an essay by White House Domestic Policy Council Director Cecilia Muñoz, she writes, “By allowing local rules that inhibit new housing development to accumulate, too many communities have limited their supply of housing over the last few decades in a way that undercuts economic mobility.”

A Challenge to Overcome The affordable housing crisis represents a significant challenge for investors, property owners, and managers in the multifamily industry. While there has been some recent headway after the chaos of the past few years, these issues will likely continue to play a major role in the state of the affordable housing market for the foreseeable future.