Family formation has cratered in the last fifteen years in the United States, with the fertility rate hitting a record low of just 1.6 babies per woman. One big reason young people are hesitant to get married and have a family is that soaring housing costs have made having and raising children much more expensive. In fact, one new study finds that “51% of the total fertility rate decline between the 2000s and 2010s” can be attributed to the increased cost of housing.
So, what do young Americans want?
Almost all of them will still say some version of a single-family home — a place with a little space, a yard, a good school, and safe streets, according to a new survey from the Institute for Family Studies. Yet for the past century, governments at every level have made it harder to build a family home. The result is predictable: fewer homes in the places families most want to live, and prices that rise out of reach.
The U.S. is short roughly 6 million homes. Home prices more than doubled over the past 15 years, but in many cities the policy response has been to make new homes harder to permit, harder to build, and thus harder to afford. Families are paying the price. A growing number are going into severe debt, in some cases more than 50% of pre-tax income, just to buy a home. Many are priced out entirely.
We can’t subsidize our way out of our family affordability crisis, as many in Washington are trying to do. Demand-side policies — cheaper credit, down-payment assistance, tax breaks, letting buyers tap retirement accounts — all slam into the same wall. If you increase purchasing power without increasing the number of homes, the extra money gets capitalized into higher home prices. We lived through this dynamic from 2012 to 2022, when ultra-low interest rates and weak housing construction drove home prices sharply higher.
The right response is to build more homes. That means changing the rules that have made affordable family housing illegal or impossible to build. There are three steps federal, state, and local leaders can take now that would get family affordability back on the right track before we enter the 2030s.
The two most important words in housing affordability are “smaller lots.” In practice, many cities use minimum lot sizes, excessive setbacks, parking mandates, impact fees, and discretionary hearings to make smaller-lot starter homes effectively illegal. States should require localities to allow modest starter homes on smaller lots by right — clear, objective standards with predictable timelines and no neighborhood vetoes. Local governments should match that with streamlined reviews and fewer gotcha fees that punish entry-level construction. This one change would create 1 million new family homes annually until prices normalize.
Larger apartments and townhomes also have an important part to play in creating affordable family housing near downtowns. It’s an unforced error that so much commercially zoned land prohibits housing, even as shopping centers sit half-empty and downtowns struggle. Cities and states should legalize and streamline housing within commercial zoning nationwide. That brings families closer to jobs, stores, and services — and it helps revive downtowns by putting residents back near local businesses.
Finally, in parts of the West, the federal government owns large tracts of land adjacent to fast-growing metros with rising prices. AEI Housing Center research finds that selling just 0.1% of federal land could create space for roughly 3 million homes — without touching national parks or other protected lands. It would also fulfill one of President Donald Trump’s campaign promises: building new “Freedom Cities” on unused public land. Done transparently, this is a supply-side, pro-family policy: open carefully chosen parcels near existing infrastructure, coordinate roads and utilities, then let builders build quickly.
Republicans have taken some steps in the right direction. The Renewing Opportunity in the American Dream, or ROAD, to Housing bill’s supply-side reforms — including making manufactured homes more affordable, limiting unnecessary environmental reviews, and housing innovation grants — are a welcome pivot away from demand-side gimmicks. But the scale of the shortage demands big levers. Smaller-lot starter homes, housing allowed near commerce, and federal land near growth can deliver supply at the scale families need.
The path forward on family affordability is straightforward: we need to make it easier to build homes families can actually afford. The question is whether local, state, and federal officials will show the political will to enact the reforms necessary to bring single-family homeownership within reach for more people — a change that could help reverse the nation’s troubling fall in family formation.
Arthur Gailes is a research fellow at the AEI Housing Center. Brad Wilcox is Distinguished Professor of Sociology at the University of Virginia and a nonresident senior fellow at the American Enterprise Institute.
