To Moira Gallagher, 38, buying a house in Anchorage would be a step toward financial stability for her growing family. But even with a six-figure household income and stable jobs, she and her husband have struggled to make a purchase.
High mortgage rates, limited housing supply and historically poor affordability have kept buying a home stubbornly out of reach for Ms. Gallagher, an economic researcher who is expecting her third child. Three- or four-bedroom homes in good school districts are both hard to come by and prohibitively expensive.
“It makes it hard to feel secure,” she said. “It affects everything.”
From Anchorage to Amsterdam, many developed and even emerging economies are confronting a similar problem: Housing supply is failing to meet demand, helping to push home prices to levels that are out of reach even for middle-income families.
Affordability problems have been exacerbated by high central bank interest rates, which officials across the globe have been using to tackle rapid inflation. Those policy rates trickle through financial markets to elevate mortgage rates — making it even more expensive for borrowers to buy a home and for builders to finance construction for new houses and apartments.
The second part of that equation is now poised to change. Central banks in many economies are lowering interest rates or preparing to do so imminently. The European Central Bank and Bank of England are already cutting borrowing costs, and the chair of the U.S. Federal Reserve signaled last week that it would start reductions in September.
But those rate cuts are unlikely to be a panacea for housing affordability.
While the shift in central bank stance is already translating into somewhat lower mortgage rates in many countries, borrowing costs are not expected to fall back to the levels that prevailed during the 2010s. Several economists said 30-year mortgage rates in the United States, for instance, could end up in the 5.5 to 6 percent range, down from their 7.5 percent peak last year but still up notably from the 4 percent that was normal before the pandemic.
Experts also warn that long-running market trends — including high labor costs, more expensive materials and regulations that limit the pace and scope of building — will continue to hinder the supply of affordable homes. It has simply become more difficult to make affordable housing construction economically feasible. At the same time, demographic trends could continue to fuel housing demand in some markets. Add it up, and lower interest rates are unlikely to come anywhere close to fixing the affordability crisis in either purchased or rental housing.
“We just haven’t built enough housing since 2009,” said Ms. Gallagher, who researches her local housing market as part of her job.
In fact, the stubbornness of the housing problem is increasingly garnering the attention of elected officials around the world. As a generation of young adults feel hopeless about their prospects of ever owning a home and as many are burdened by expensive rents, it is making them demoralized about the economy. And that is spurring calls for action.
“I think we’ve reached a point where it’s fraying the bonds of society,” said Glenn Kelman, the chief executive of the real estate firm Redfin.
National politicians are even beginning to propose solutions, reversing a decades-long practice in which many treated housing as a more local issue.
Ursula von der Leyen, the president of the European Commission, has vowed to appoint the European Union’s first housing commissioner and has indicated interest in revising key rules so Europe can more broadly subsidize home construction. Vice President Kamala Harris, the Democratic presidential candidate in the United States, is promising assistance for first-time home buyers and beefed up incentives for building. Her Republican opponent, former President Donald J. Trump, has blamed competition from undocumented immigrants for the housing shortage and promised deportations to address the crisis.
Yet it is not clear whether such approaches would be effective or even doable — and experts warn that it could be difficult to quickly solve a housing affordability problem that has been years in the making.
Take the U.S. example. In America, home prices and rents have regularly climbed faster than average wages since roughly 2012. Back then, builders had pulled back after the bruising 2008 housing crisis, leaving properties in short supply in several major cities.
“The relative price of housing has been moving up substantially for some time,” Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said in an interview.
Then home values surged sharply — and much more broadly — in the wake of the pandemic.
Average weekly earnings are up 22 percent since early 2020, but rents are up 24 percent. Home prices are up about 50 percent. And that jump in house prices has collided with high interest rates to push affordability to historically poor levels.
The challenges haven’t been limited to large cities. The Atlanta Fed tracks whether median-income households are able to absorb the yearly costs associated with owning a median-priced home. While that is still possible in some places, like Pittsburgh, it is not in a large and growing number of markets — from Asheville, N.C., to Albuquerque.
In places where affordability was already a problem before the pandemic, like New York and Boston, the situation has become more dire.
Affordability should begin to improve somewhat as central bank interest rates come down, making it cheaper for families that are using mortgages to buy homes. Just how much is complicated.
Rates on 30-year mortgages are already moderating as the Fed signals that it is preparing to cut interest rates. All else equal, that will make monthly housing payments cheaper.
But all else is not equal.
First, many economists expect would-be buyers to jump into the housing market from the sidelines as rates fall. That could collide with limited supply to push prices up. In Britain, for instance, a rate cut by the Bank of England this summer has already been met by an uptick in interest among would-be home buyers.
And in the United States and several other advanced economies, large populations of 30-somethings are at an age where they have formed households and want to buy — meaning there could be a substantial amount of pent-up housing demand.
At the same time, two other trends could potentially help to free up supply to meet that demand.
In the United States, where long-lasting fixed-rate mortgages are common, many families have been reluctant to move because they do not want to leave the low mortgage rates they locked in years ago. As rates come down, they may find themselves more willing to finally put their homes on the market.
That will not necessarily leave the market with more houses overall: People may simply sell one house to buy another. But if some people trade out of single-family homes for retirement housing, or out of starter homes in favor of nicer places, the reshuffling could free up supply in parts of the market where it is badly needed.
And in many global economies, lower rates could make it more affordable for developers to finance home construction. And the expectation that demand will bounce back could encourage developers to build.
“It’s clear that over the last two years, since early 2022, that monetary tightening has reduced housing investment,” Philip Lane, chief economist of the European Central Bank, said in an interview. “As the monetary tightening is unwound, we should expect housing investment to recover.”
That could help create supply for rental housing in particular. Multifamily construction was strong a few years ago, but it has fallen sharply amid higher interest rates.
“On the rental market, it’s fairly unambiguous,” said Thomas Davidoff, a housing economist at the University of British Columbia. “In the owner market, it’s a little more complicated, because it will push prices up.”
Michael Fratantoni, chief economist at the Mortgage Bankers Association, said he believed home prices in the United States would climb 3 percent in 2025 and 2.5 percent in 2026 as supply and demand picked up. In all, the combination of gradual price increases and slightly cheaper mortgages should make affordability a little bit better for people relying on mortgages, several economists said — but not as good as it was before 2020.
Even when it comes to apartment and home construction, lower rates won’t solve everything, because pricey financing isn’t the only issue preventing builders from constructing more affordable housing.
Andrew Mikula, a senior fellow on housing at the Pioneer Institute, an independent research organization in Boston, said that when local builders were asked what was holding them back, they often talked about costs that made affordable housing financially untenable. Recently, those include labor, building materials and utility expenses.
“Interest rates are rarely the first thing that comes up,” he said.
Between the limited building after the 2008 housing crash and low housing starts recently, many countries around the world have a home shortfall that has taken years to develop. Mark Zandi, chief economist at the ratings agency Moody’s, estimates that America faces a shortfall of three million homes, for instance. Most of the gap is in affordable units.
“It took a generation for us to get into this mess,” Mr. Zandi said. It will take time to get out of it.
But some in the industry see reasons to hope — even if it does not hinge entirely on lower interest rates. Mr. Mikula said that both local and national politicians could become more responsive to the housing problem now that it had begun squeezing not just poor but also middle-class households.
“It’s not just the working poor anymore, especially in places like Boston, feeling the squeeze,” he said. “That’s broadening the coalition of people personally invested in this.”
The home-search frustration facing working professionals like the Gallaghers in Alaska is becoming common. Voters in Ireland and elsewhere increasingly see housing affordability as a top political issue. Debate is active about how to fix affordability issues in Canada. Protests have taken place in the Netherlands.
For some, the pain is acute. Tamara Kuschel, a project leader at the social services organization De Regenboog Groep in Amsterdam who focuses on temporarily housing people, said a new group of working- and middle-class people had been seeking homelessness services over the past decade as home prices and rents jumped.
“We saw a group of people in our walk-in houses that were not our regular target group: They still had jobs,” she said. While she has often encouraged such people to look outside pricey Amsterdam to find new homes, that is increasingly not working. These days, small Dutch towns are also too expensive.
“Even there, it’s getting harder and harder to find houses,” she said. “For the teachers, the bus drivers, the social workers like me, they are not affordable.”