Persistent affordability challenges and rising economic uncertainty are squeezing housing conditions, with weakening labor markets and plummeting immigration dampening household growth, according to a new report from the Harvard Joint Center for Housing Studies. The State of the Nation’s Housing 2026 report also finds that construction activity has softened, cost burdens for both renters and homeowners continue to climb, and federal assistance is profoundly underfunded.
Drivers of Housing Demand Are Weakening
The new report shows that household growth, a key driver of housing demand, slowed for the third consecutive year in 2025, falling from an average of 2.0 million households in 2021 to just 1.1 million in 2025. The slowdown reflects reduced household formation among young adults amid weak labor markets, heavy student debt, and intensifying economic uncertainty.
“Many young adults simply cannot afford to form their own households and are instead doubling up or living with family,” says Daniel McCue, senior research associate at the Joint Center for Housing Studies. “For others, deep uncertainty about their financial futures and about the broader economy are causing them to delay major life decisions. This pullback is a clear sign of economic stress that reverberates through housing markets.”