What do vacancy rates tell us about the shortage of housing?

Reflecting the unprecedented housing shortages across the United States in the post-pandemic market, U.S. vacancy rates hit their lowest readings in decades in 2021. According to NAHB’s analysis of the 2021 American Community Survey (ACS), owner vacancy rates dropped below 0.9% and rental vacancy rates reached a new low of 5.2%, the lowest levels recorded by the ACS since the survey started generating these data in 2005. Comparing current abnormally low vacancy rates with long-run typical rates across metro markets of the U.S., NAHB now estimates that 1.5 million units are required to close the gap and bring the current vacancy rates back to the long-run equilibrium levels. This is our revised estimate for the size of the structural housing deficit in the U.S. It indicates the amount of above equilibrium home building required to bring the market back into long-run balance. NAHB’s forecast indicates that this will take place between 2025 and 2030. Homeowner and rental vacancy rates are one of the key statistics that are used to judge the health and direction of the housing market. The current low homeowner and rental vacancy rates are typically interpreted as a sign of tight housing markets, with abnormally low vacancy rates signaling a greater housing shortage. The ACS data allow estimating vacancy rates across metropolitan areas and identifying metro housing markets where unusually low vacancy rates signal deeper supply-demand imbalances. 

Source: NAHB Eye on Housing Blog