Rockford, Illinois MSA Housing Playbook | AEI Housing Center

Strong FoundationsA Playbook for Housingand Economic GrowthRockford, Illinois MSA[]Strong Foundations: A Playbook for Housing and Economic GrowthOverviewHousing has long been a cornerstone of the American dream and thenation’s economy, but a supply–demand imbalance has pushed the U.S.market into crisis, driving up prices and limiting workforce mobility.Addressing this shortage is essential to stabilize the market andsustain economic resilience, so the U.S. Chamber of Commerce and the AEIHousing Center* have released Strong Foundations: A Playbook for Housingand Economic Growth, a guide that gives state and local leadersactionable solutions. The playbook is backed by location specific dataon affordability, net migration, and homeless displacement pressure.These data allow officials to make informed decisions to reinforcehousing stability and spur growth.We thank our data providers – First American, Intercontinental Exchange,U.S. Parcl Labs, Zoneomics, and Cotality – our analysis would beimpossible without their data. We also acknowledge the use of data fromBureau of Labor Statistics, Bureau of Economic Analysis, SafeGraph, U.S.Census, Overture Maps, OpenStreetMap, ESRI Community Maps, Microsoft,Freddie Mac, U.S. Department of Housing and Urban Development, IRS, andthe U.S. Geological Survey.The Key to Housing AbundanceSmall lots, small lots, small lots. Enabling small lots are essential tobuilding more family-sized starter homes.Key ways to unlock smaller lots and new housing supply- Lot size flexibility in new subdivisions: allow the building of homes on small lots instead of only large lots. Small lots enable the construction of starter single-family homes and townhomes.- Home dwelling type and lot split flexibilities on existing lots: allow the construction of a variety of dwelling types and sizes, including duplexes, triplexes, quadplexes, townhomes, and ADUs.- Flexibility to build homes near jobs: allow for a residential overlay by-right in non-residential districts such as commercial/retail, bringing people closer to jobs and amenities.Building in flexibility for lot size and density will help unleash newhousing supply, restore affordability for buyers and renters alike, andreopen the path to ownership for working families.* AEI Housing Center scholars Edward Pinto, Tobias Peter, and ArthurGailes.[]AEI Housing Center | September 03, 2025While every community has differences in infrastructure such as road,schools, and sewer and water availability, and local laws vary, ourHousing Playbook offers strategies to help add more housing supply tomeet growing demand.Option 1: Lot Size Flexibility in New Subdivisions- Allow the option to build homes on small lots instead of only large ones. This enables the construction of starter single-family homes and townhomes. Metropolitan areas should consider establishing minimum lot sizes no larger than 1,200 square feet for lots in new residential subdivisions.Projection: 500 additional single-family homes per year with a medianvalue of $273,000, which is 7.8% below today’s median value of RockfordMSA’s single-family homes built in new subdivisions from 2000-2024.Option 2: Home Dwelling Type and Lot Split Flexibilities on ExistingLots- Metropolitan areas should consider allowing duplexes, other multiplexes, townhomes, or accessory dwelling units (ADUs) on single-family lots and allow lot-splits by setting a minimum lot size of no more than 1,200 square feet for new lots.Projection: 19 net new homes annually.Option 3: Flexibility to Build Homes Near Jobs- Allow for a residential overlay by-right in non-residential areas, which could include shopping areas or other appropriate commercial districts, bringing people closer to jobs and amenities.Projection: 48 net new homes annually.[]Impact of the Housing ShortageRecent studies estimate that the national housing shortage ranges fromaround 4 to 8 million homes. In this shortage analysis, we use themid-point of about 6 million homes.[1] The map below shows where thatshortage lies.Illinois is short 28,700 homes—roughly 0.5% of its entire housing stock.That shortage is an invisible hand squeezing families out of homeownership, pushing rents higher, and forcing workers to commute fartherfrom jobs and schools. Every year we fail to close it, prices climbfaster than wages, overcrowding worsens, and the dream of a starter homeslips further away.Fixing the nation’s housing shortage would:- Bring home price growth in alignment with wage growth.- Give renting families a path to home ownership.- Relieve upward pressure on homelessness and displacement.[]Why Allow for Lot Size and Location Flexibility?This gives owners the right to build homes that most people canafford—whether in new neighborhoods, existing communities, or near jobs.It increases supply and affordability by allowing people to buildstarter homes on smaller lots in new residential subdivisions, and byallowing duplexes, triplexes, fourplexes, townhomes, or ADUs onsingle-family lots. It also refers to location – allowing homes nearjobs and amenities in commercial and other non-residential areas.It creates more affordable starter homes by using land more efficiently.This approach reduces sprawl, infrastructure costs, and energy use. Bybuilding smaller homes on smaller lots, we can significantly increasethe supply of lower-priced, family-sized homes while freeing up existinghousing stock.It creates more workforce housing since single-family detached homes andtownhomes average about 3.5 and 2.8 bedrooms respectively and aresuitable for raising a family and naturally affordable shared livingarrangements (42% of renters live in single-family homes).What is the flexibility to build homes near jobs?Legalizing single-family, multifamily, and mixed-use residential byright in all commercial, industrial, and mixed-use areas. This allowspeople to live near their jobs and amenities if they choose.By-right housing can transform underused commercial and industrialproperties into owner-occupied and rental homes, helping cities makebetter use of land and infrastructure. Combined with small lots, thishelps give people of all incomes greater choice in where and how theychoose to live.The Housing Affordability Trifecta: Why Smaller Lots Mean Lower Home Prices- Smaller lots → lower land costs- Smaller homes with standard finishes → more affordable per home- More townhomes → efficient land use, lower cost per square foot[]Diving Deeper: Option 1: Lot Size Flexibility in New SubdivisionsHome values for single-family detached (SFD) and single-family attached(SFA) homes in new subdivisions vary significantly based on homes peracre (lot size). As lot sizes shrink, home prices typically go down.Zoning regulations, however, frequently stand in the way. For instance,from 2000-2024, 0.6% of new homes built in residential subdivisions inRockford MSA have been townhomes (SFA)—a form that uses land moreefficiently.The impact of restrictive zoning is clear in home prices: In RockfordMSA, the median price of a newly built SFD home in a subdivision is$296,000—well above the median sale price of financed homes at $205,000.Allowing smaller-lot subdivisions and more homes in existingsingle-family areas would enable the construction of more homes at lowerprice points—helping to add supply and close the gap between what isbuilt and what most working families can afford.[2] To achieve thisoutcome, Rockford MSA should set a minimum lot size of no more than1,200 sq.ft. for newly constructed single-family homes.[]Affordability of SFD and SFA Homes Built from 2000-2024 for Middle/Working Class Occupations[]A common misconception is that developers prefer building big homes onlarge lots because it yields higher profits. In reality, local zoningcodes and minimum lot size requirements often dictate the size of ahome—not market preferences.Consider a simple thought experiment: a builder would earn far moreprofit by mass marketing one hundred $300,000 townhomes on 1/20-acrelots than by building five $1 million custom homes on one-acre lots.Clearly, total profit would be higher selling $30 million worth oftownhomes compared to $5 million worth of homes.[]- If single-family detached homes had been built at 4.4 homes per acre (instead of 3.4), Rockford MSA could have added 100 more homes per year (2,400 over 2000-2024).- If 80% of single-family detached homes had been built at 4.4 homes per acre and the remaining 20% had been converted to townhomes at 27.1 homes per acre, Rockford MSA could have added 500 more homes per year (13,400 homes over 2000-2024).These two changes alone would have increased the number of family-sizedresidences built from 2000-2024 by 0.0% – from 8,400 to 0.Going forward, building 80% of SFD homes at 4.4 homes per acre andconverting the other 20% to townhomes at 27.1 homes per acre wouldincrease Rockford MSA’s recent single family permit levels by 215% –from 230 to 730 homes per year.Diving Deeper: Option 2: Home Dwelling Type and Lot Split Flexibilities on Existing LotsAllowing home dwelling type and lot split flexibilities on existing lotsin single-family neighborhoods in Rockford MSA could add 19 homes peryear, or an increase of about 22% over the current rate of SFDconstruction in Rockford MSA.These new homes are created through the legalization of home dwellingtypes or by splitting existing lots into smaller parcels. They can takethe form of smaller lot SFD homes, townhomes, 2–8 home multiplexes, andADUs in neighborhoods currently restricted to single-family detachedhomes.[3] To achieve this outcome, Rockford MSA should set a minimum lotsize of no more than 1,200 sq.ft. for new lots created throughsingle-family lot splits.This bar chart compares the number of new SFD homes built in RockfordMSA from 2014-2024 (shown in dark blue) to the potential number of homesthat could be created by these flexibilities.[][]Diving Deeper: Option 3: Flexibility to Build Homes Near JobsLegalizing housing in commercial and other areas by allowingsingle-family, multifamily, and mixed-use residential homes to be builtby right in non-residential areas. [4]This allows for the transformation of underused land into vibrantwalkable neighborhoods, without the need to expand into undevelopedareas or invest in new infrastructure.This policy is a win-win-win:- Residents can live closer to jobs, shops, and other amenities. This can be especially helpful for service workers working nearby.- Cities can expand their tax base without increasing tax rates.- Local businesses can gain more foot traffic and new customers.Residential overlays help solve housing shortages, reduce commutes, cuttransportation and housing costs, and make better use of existinginfrastructure — easing costs for families, reducing strain on publicservices, and supporting healthier, more livable communities.Option 3’s estimate for additional homes per year is based on thesubject city’s current level of home production in its currentcommercial, industrial, and mixed-use areas as compared to best-in-classcities that are similar in size.To explore residential overlay (Livable Urban Village) areas in yourjurisdiction, click here. Here are two successful examples:Livable Urban Village Successes and Opportunity: Miami built over 2,000homes/year in residential overlay areas (yellow) from 2012-2024. Chicagoonly built 600/year, and has more opportunity to grow. [5]Source: First American, Zoneomics, Overture Maps, OpenStreetMap, ESRICommunity Maps, Microsoft, and AEI Housing Center.A Path to Housing Abundance: Implementation StrategyThe three most important things in addressing housing abundance andaffordability: “small lots, small lots, small lots.” Smaller lots allowmore homes to be built on the same amount of land. This reduces landcosts, leads to smaller, but usually still family-sized homes, andpromotes townhomes, which cost less to build than a similarly sizeddetached home. They also provide home-sharing opportunities for serviceworkers.Across the country—and around the world—case studies consistently reveala formula for successful housing supply reform:- Allow small lot flexibility for new subdivisions, home dwelling type and lot split flexibilities on existing lots, and the flexibility to build homes near jobs by adopting one or more of the reform options outlined above,- Enable by-right zoning, so projects don’t get delayed or killed by discretionary reviews,- Follow the Keep it Short and Simple (KISS) principle instead of micromanaging the process.How Does the KISS Principle Unlock Housing Supply?The KISS principle refers to eliminating unnecessary complexity in thehomebuilding process. Simplicity brings certainty, lowers costs, andmakes small-scale infill and larger-scale development both feasible andattractive. See Full List of KISS Reforms to Consider for more details.Others Are Doing it, and Model Legislation Is AvailableSeveral states—including Texas, California, Montana, Vermont, Oregon,and Washington—have recently enacted legislation to support housingabundance.The key to successful reform lies in adhering to the Housing AbundanceSuccess Sequence while avoiding unnecessary micromanagement. A range oflegislative templates and model bills are readily available to guidethis process. Texas SB-15 (lot size flexibility for new residentialsubdivisions in larger cities) and Texas SB-840 (residential andmixed-use housing on all commercial and light industrial land in largercities) were enacted in mid-2025. Taken together, these two billsimplement Playbook Options 1 and 3. Implementation of Option 1 and 2 canbe accomplished through a single model bill: the AEI Model Starter HomesAct, which sets minimum lot sizes for both residential subdivisions andhome dwelling type and lot split flexibilities on existing lots. Asecond model bill, AEI Model Multifamily and Mixed-Use Residential inCertain Zoning Classifications, covers Option 3. It would allow for aresidential overlay by­right in commercial, industrial, and mixed usezones.The Rockford MSA Migration Map: Who’s Coming and Going?This map shows net domestic migration flows to and from Rockford MSAfrom 2021–2022, based on IRS data.- Rockford MSA’s net in-migration from other metros (shown in green) has been largely from Chicago, Illinois MSA and Janesville, Wisconsin MSA. Net out-migration has been largely to Detroit, Michigan MSA and Dallas, Texas MSA. [6]- Rockford MSA had a net inflow of about 780 individuals from 2021-2022.[]Domestic Migration Into and Out Of Rockford MSASorted by absolute net migration from 2021-2022[]Boosting Housing Supply Keeps Home Prices in Check – Especially in High Job Growth MarketsIn fast-growing metros, home prices tend to rise sharply when housingsupply doesn’t keep pace with job growth.[7]This graphic shows that metros with high employment growth, but low newconstruction shares, experienced the steepest increases in home pricesbetween 2012 and 2019 (before the pandemic).[8]This trend is measured by home price appreciation (HPA)—the percentageincrease in constant-quality home values over time. When demand forhousing rises but new construction lags behind, prices appreciatefaster.Building more homes in high job-growth areas helps slow home priceincreases, making housing more naturally affordable. This highlights howboosting supply can relieve affordability pressures.From 2012-2019, metros in Illinois state had below average employmentgrowth and below average share of new home construction, compared tonational averages. As a result, home price appreciation of 38% was belowthe national average of 62%.[][]At the national level, home prices have become disconnected from fundamentals- Home prices have nearly tripled since 2012, with many areas having risen much faster than incomes for decades.- Wages, rents, and construction costs have risen much more slowly.The growing disconnect between construction costs and home pricessuggests the main force behind higher prices is regulation that makesland scarce and adds to building costs.[]Source: Bureau of Labor Statistics (BLS), Cotality, and AEI HousingCenter, https://www.aei.org/housing.Rising Home Prices Drive Displacement and HomelessnessWhen home prices rise faster than incomes, displacement pressureincreases—and with it the risk of homelessness. Communities that fail tokeep housing supply in line with demand experience the steepest pricehikes, making even modest apartments unaffordable and pushing out thoseon the margins.[9]The solution is clear: legalize and enable the construction of morehomes in the middle price range so that more older homes “filter down”to lower-income households over time. This is important as it providesmore rapid rehousing opportunities for formerly homeless individuals andfamilies.The chart below shows that as housing becomes less affordable—measuredby the ratio of home prices to income—homelessness tends to increasesharply, especially once that ratio exceeds 5.0. Communities that buildtoo little housing face the highest displacement rates.[]Institutional Investors Own Less Than 1% of U.S. Single-Family HomesDespite drawing widespread public condemnation, institutional investorsplay only a minor role in most single-family housing markets.[10] Thedata make this clear:- Institutional investors—defined as those owning 100+ homes—make up just 1.0% of the national single-family housing stock.- Nationally, mom and pop investors—defined as those owning less than 100 homes— own 12.4% of single-family housing stock. The vast majority of investor-owned homes are generally held by small, mom-and-pop landlords with portfolios of 2–9 homes. [11]- In 96% of U.S. counties, investor-owned homes account for less than 2% of all single-family homes.- Just 14 metro areas—including Atlanta, Dallas, Houston, Phoenix, Charlotte, and Tampa—account for half of all investor-owned homes nationwide.- In Rockford MSA, institutional investors own just 0.3% of single-family homes.Institutional investors capitalize on regulatory failures that havecreated a housing scarcity.- They purchase homes in places where supply is constrained, betting on continued price and rent appreciation. Their focus is on markets with strong fundamentals, high demand, and limited new construction.- They don’t reduce housing supply; they shift homes from the owner occupied to the rental market. The total number of units remains the same.- Most recently, low interest rates—especially during the pandemic—have fueled their activity.The bottom line: Fix the supply problem, and investor influence willfade.[]Carpenter Index: Declining Affordability for Working-Class HouseholdsThe Carpenter Index measures the percentage of entry-level homes in ametro that a carpenter-headed household can afford. It offers a clearsnapshot of how home ownership is becoming increasingly out of reach forblue-collar workers across many metro areas.Affordability for carpenter households (a proxy for blue-collar workers)has generally declined across Illinois’s metros. The median carpenterhousehold was able to purchase the bottom 80% of entry level homesacross Illinois’s metros, down from 100% in 2012. Over the same period,the Rockford, Illinois MSA Carpenter Index from 100% to 100%. [12][]Home Ownership and Number of Bedrooms by Property TypeIllinois’s home ownership rate for homes built from 2010-2023 is 56% –10 percentage points below the national average of 66%.[13]The bar chart below shows the Illinois home ownership rate by propertytype for homes built from 2010-2023 and bedroom count by home type, forproperties built from 2010-2023 and all properties.- Single-family detached (SFD) and attached (SFA) have high or medium home ownership opportunity (95% and 76%, respectively), while multifamily (MF) properties with 20+ units have low home ownership opportunity (6.3%).[][]Rent Burden on Food Service WorkersAcross metropolitan areas, rent and home prices vary dramatically - butwages by occupation barely budge.In high-cost metros, land use limits on home and apartment constructiondirectly create heavier rent burdens for low wage service workers.Occupations like food prep (14M workers), cleaning and maintenance (6M),personal care (4.6M), sales (14.3M), office and administrative support(19M), production (9M), and transportation (15M) make up nearly half ofall U.S. jobs – yet these workers typically earn about 80% of thenational median wage.[]The chart above highlights the wage/1-bedroom relationship acrossIllinois’s 9 largest metros and their nearest metros. While wages forfood preparation workers remain relatively flat across metros, rentburdens increase substantially in higher-cost areas.Madison, WI and Rockford, IL MSAs:- Median wage for food preparation workers: $30,120 (35% of AMI) in Madison, WI vs $30,050 (45% of AMI) in Rockford, IL.- Median annual rent for a 1-bedroom apartment: $14,508 in Madison, WI (93% higher) vs $7,536 in Rockford, IL.- Resulting rent burden: A one-bedroom apartment in Madison, WI costs 48% of the income of food preparation workers, compared with 25% in Rockford, IL.However, keep in mind that across the nation, only 32% of renters rent a1-bedroom apartment.Three-Bedroom Cost Burden: A More Common ScenarioA more typical housing arrangement for lower-wage or service-sectorworkers is renting a multi-bedroom home. In this analysis, we examinethe cost burden associated with renting a three-bedroom single-familyhome, which is one of the most common configurations for shared housingamong these workers. While the median gross rent for a three-bedroomhome is 24% higher than for a one-bedroom apartment nationally, thesehouseholds generally include an average of 2.1 adults, helping todistribute costs across multiple earners.[]Janesville, WI and Chicago, IL MSAs:- Median wages for dual-earner food preparations households: $56,820 in Janesville, WI and $67,080 in Chicago, IL, reflecting comparable earnings.- Median annual rent for a three-bedroom single-family home: $14,220 in Janesville, WI (25% higher) and $15,000 in Chicago, IL.- Resulting rent burden: A three-bedroom single-family home in Janesville, WI costs 25% of the income of dual-earner food preparation households, compared with 22% in Chicago, IL.This analysis underscores that even with multiple earners, rent burdensremain severe in high-cost metros, further emphasizing the need toincrease housing supply in high-rent areas to alleviate cost pressureson service-sector workers.Rent Burden Across OccupationsLooking beyond food prep workers, the charts below compare median rentfor 1-­bedroom apartments and 3-bedroom homes to wages across a range ofcommon occupations.In high-cost metros, service workers – especially those in food prep,cleaning, and healthcare support – are often paying nearly half of theirincome in rent. Even in more affordable areas, rent burdens remain highfor many.The size of each bubble shows how many workers in that metro fall intoeach category.[][]Full List of KISS (Keep it Short and Simple) Reforms to Consider:The KISS principle refers to eliminating unnecessary complexity in thehomebuilding process. Simplicity brings certainty, lowers costs, andmakes small-scale infill and larger-scale development both feasible andattractive.- Enable smaller lots by reducing minimum lots sizes and simplifying lot splits - Why? Enables cost-effective infill development by reducing time and administrative hurdles.- Implement pre-approved design templates - Why? Streamlines the permitting of ADUs and small-scale units like backyard cottages, giving builders and homeowners clarity and confidence.- Implement permitting “shot clocks” or allow third-party reviews - Why? Permitting delays are a hidden tax on housing.- Clean up the zoning code - Adjust standards so they are small lot friendly, like: Floor Area Ratios (FAR), setback and height limits, demolition fees, etc. - Why? It’s illogical to legalize townhomes, for example, but then cap building heights at 1.5 stories.- Reduce parking mandates - Why? Parking takes up space and drives up costs. Let the market decide how much parking is needed; and if parking is really at a premium, charge for curbside parking rather than requiring costly off-street parking.- Lower or waive impact fees - Why? Increased property tax revenue from more housing will offset lost upfront fees.- Align energy and building codes with affordability goals: - Lower energy standards for small or infill projects. - Apply the International Residential Code (IRC) to 3–6 unit buildings (as Memphis and North Carolina have done). - Allow single-staircase designs in multifamily projects. - Allow modular or off-site construction. - Why? These changes allow more developments to pencil out without sacrificing safety or livability. - Reform condo defect liability laws. - Why? Reduce frivolous lawsuits and revive the construction of entry-level ownership housing.Note: Many of these steps are included in the AEI Housing Center’sLight-touch Density Model Bill.What is Micromanagement – and Why Does It Kill Housing?Micromanagement in housing policy refers to layering complexity, redtape, or contradictory regulations on the building process. These rulesoften sound reasonable in isolation but together make new housingfinancially or logistically impossible to deliver.Common Micromanagement Pitfalls:- Spot upzoning - Why? Delivers windfalls to a few rather than enabling broad affordability.- Reliance on subsidies to add new supply - Why? Subsidy pipelines are slow, complex, costly, corruption-prone, and crowd out private development, especially by smaller builders. They are insufficient to meet demand on their own.- Inclusionary zoning & income limits - Why? Shrinks profitability, inflates rents on market-rate units, narrows the eligible tenant pool, and adds compliance headaches, especially for smaller builders.- Special treatment for subsidized housing only - Why? Creates an uneven playing field that discourages unsubsidized supply. Market-rate builders face all the red tape, while only subsidized projects are streamlined. To solve the shortage, reform must apply to all housing—not just subsidized.- Special programs to “jumpstart” housing construction - Why? They’re politically driven, complex, expensive, corruption-prone, and hard to scale—distracting from broader reforms. If real needs exist, like financing for small builders, the market will respond, once it’s legal and feasible to build.- Permit caps - Why? Artificially suppress supply and create political gatekeeping that deters investment.- Owner-occupancy mandates - Why? Restrict the ability to build or finance ADUs and reduce flexibility for homeowners and builders.- Rent control - Why? Reduces the return on investment, discourages new construction, and encourages condo conversions or disinvestment.- Uneven regulations - Why? Requiring more of infill housing than single-family homes undermines housing diversity.- Open space and landscaping minimums - Why? They reduce buildable area, drive up costs, and make small-scale or infill housing financially and physically unviable. They also ignore that trees regrow over time.- Prevailing wage requirements for small-scale projects - Why? Applies large-project labor standards to small infill efforts, significantly raising construction costs unnecessarily.- Basement granny flat height limits - Why? Blocks natural conversions of many existing basements.- Growth boundaries - Why? Artificially constrain land supply and increase land costs within the boundary, undermining affordability.- Housing needs assessments - Why? Top-down, bureaucratic exercises that drain resources and delay action—measuring the shortage and leaning on subsidies instead of enabling real solutions.- Exclusive focus on Transit Oriented Development - Why? Limits growth to narrow corridors while leaving most land off-limits. This results in small, high-cost units dominated by rentals, and in practice relies heavily on subsidies for affordability.Find this playbook onlineTo read this playbook (and over 6,000 others for states, cities, metros,and more) online, visit https://aeihousingcenter.org/playbook, or scanthe QR code below.[]Background and MethodologyTo read the background and methodology for this playbook, visithttps://www.aei.org/strong-foundations-a-playbook-for-housing-and-economic-growth-methodology/,or scan the QR code below.[][1] We assume a national housing shortage of 6 million homes - amidpoint between various studies estimating a shortage of between 4 and8 million (see for example: Up for Growth, Zillow, Realtor.com,McKinsey). We then allocate that shortage to counties (or cities) usingthe ratio of median home price to income.[2] For more details, see As-Built & New Residential Subdivisions.[3] Projections for ADUs are given only in cases when they are thehighest and best use of land. In areas with high land values, duplex,triplex, and townhome conversions are typically the higher and betterland use. If both ADUs and small multiplexes make financial sense, weassume the option that produces the most homes on that lot. Light-TouchDensity: Housing Supply and Affordability Estimates.[4] The playbook does not include estimates for the supply benefitsgained from adding more housing in adjacent residential areas within 1/4mile of residential overlay areas as they are included in Option 2estimates.[5] Note: Each dot represents a multi-family home built from 2010-2024,sized by the number of units in the property.For more, see: AEI Housing Center’s Housing and Economic AnalysisToolkit (HEAT) Livable Urban Villages[6] For more detail, see: AEI Housing Center’s HEAT: IRS DomesticMigration Map.[7] AEI Housing Center’s HEAT: Metro Supply & Demand.[8] Although more recent data are available, we use data through 2019 toavoid the atypical market disruptions caused by the pandemic. Thisapproach allows us to better capture the relationship between homeprices, new housing supply, and job growth under more typical,pre-pandemic conditions.[9] Of 54 variables tested, the ratio of median home price to medianincome had the greatest explanatory power. AEI Housing Center GoodNeighbors Toolkit[10] AEI Housing Center’s HEAT: Investor Shares[11] We define institutional investors as entities that own more than100 units. Their combined shares are add to 1% (0.44% + 0.54%).According to the Census Bureau’s American Community Survey (ACS), thereare about 11.2 million long-term rental units in the US in 2023, aboutthe same number of rental units in the Parcl Lab’s data. However, ParclLabs’ definition of investor-owned homes includes second homes, sincethey track the count of properties owned by individuals or entities.According to the ACS, second homes account for about 4.5 million homes.Since we assume that most of these second homes are owned by small-scaleinvestors, this can reduce their ownership share from 12.4% to 7.4%.[12] For more detail, see AEI Housing Center’s HEAT: Housing MarketIndicators (Largest 400 Metros)[13] FRED.