Connecticut faces housing crisis as 89% of households priced out of new homes

The joint informational forum on housing, held by the Planning and Development, Bank, HSG, and INS Committees on January 28, 2025, focused on the pressing issues surrounding housing affordability and development in Connecticut. The meeting highlighted the significant regulatory burdens impacting the construction of both single-family and multifamily homes, as well as the alarming trends in home prices and ownership rates.

The discussion began with an overview of the costs associated with home development. It was noted that regulatory expenses account for approximately 41% of multifamily development costs, with single-family homes incurring over $41,000 during the development phase and over $52,000 during construction. This regulatory burden, stemming from federal, state, and local regulations, was identified as a major hindrance to the construction process.

A proposed ten-point plan was introduced to address these challenges. Key solutions included eliminating excessive regulations, promoting careers in skilled trades, addressing supply chain issues, and advocating for federal tax legislation to expand affordable housing. The plan also called for the removal of inefficient local zoning rules and the adaptation of cost-effective building codes.

Population growth was another focal point of the meeting. The U.S. experienced a nearly 1% population increase, the highest in over two decades, largely driven by net migration. Connecticut's growth rate was reported at 0.9%, with cities like Worcester showing the most significant increases compared to Hartford and Bridgeport.

The forum also addressed the dramatic rise in home prices, which have surged over 50% nationally since February 2020, with Connecticut seeing a 58% increase. This escalation has led to a concerning affordability crisis, as the ratio of home prices to household income has risen from three times in the 1970s to five times currently. In 2022, this ratio peaked at 5.36 times the median household income.

Inventory levels in the housing market are at decades-low levels, with only 4.5 months of supply available, compared to the six months needed for a balanced market. Homeownership rates in Connecticut are close to the national average at 65.7%, but significant disparities exist among metropolitan areas, with Waterbury leading at 67.9% and New Haven lagging at 58.8%.

The meeting concluded with a stark analysis of housing affordability in Connecticut. It was reported that 89% of households are unable to afford a new median-priced home, which is currently over $941,000. The income required to qualify for such a home is nearly $320,000. The affordability crisis is further illustrated by the percentage of income families must allocate for mortgage payments, with Bridgeport families needing to spend 50% of their take-home pay.

Overall, the forum underscored the urgent need for comprehensive solutions to address the housing crisis in Connecticut, emphasizing the importance of regulatory reform and increased housing supply to improve affordability for residents.