The Great Housing Mismatch

By Ryan Kilpatrick, Flywheel Company

America has a housing problem, but it's not just about quantity—it's about fit.

While headlines focus on housing shortages and affordability crises, there's a fundamental disconnect between the homes we're building and the homes Americans actually need. This mismatch represents one of the most overlooked aspects of our national housing challenge.

The Demographics Don't Lie

The American household has transformed dramatically over recent decades.

• 62% of American households consist of just one or two people, according to Census Bureau data. Pre-1970, a majority of households were families with children. But this hasn’t been true for several decades.
• Singles living alone now represent nearly 30% of all U.S. households
• The average U.S. household size has shrunk from 3.3 people in 1960 to 2.5 today
• The percentage of households with children has fallen from 56% in 1960 to about 30% today

These aren't temporary trends—they reflect fundamental social shifts including delayed marriage, lower birth rates, longer lifespans, and changing lifestyle preferences. Meanwhile, the size of an average new home has more than doubled in square feet since 1970.

Yet We Keep Building Big

Despite these demographic realities, new housing construction continues to skew heavily toward larger homes:

• The median size of a new single-family home built in America exceeds 2,300 square feet
• More than 60% of new homes have 3+ bedrooms
• Less than 10% of new construction is designed specifically for one or two-person households
• Multi-family housing starts, which typically include smaller units, consistently lag behind single-family construction
• The result? Millions of Americans live in homes that are either too large, too expensive, or poorly suited to their actual needs.

The Cost of the Mismatch

This disconnect between housing stock and household size creates numerous problems:

Financial strain: Smaller households are forced to stretch their budgets for space they don't need or want. Housing costs consume an ever-larger portion of income that could otherwise go toward savings, healthcare, or quality of life.

Inefficient use of resources: Heating, cooling, and maintaining unused rooms represents a significant waste of energy and environmental resources.

Limited mobility: Empty-nesters and older adults often find themselves "stuck" in large family homes because suitable smaller alternatives don't exist in their communities. The result is, not only do we have millions of empty nesters living in homes that may be far too big for their needs, but when they are unable to downsize into a better option, they are also preventing the next young family from moving into their family-sized house. This creates a cascading impact throughout the housing migration chain that affects everyone.

Reduced housing access: Young adults and single-person households have relatively few good options in desirable locations. As a result, competition for the limited supply of appropriately-sized housing can get pretty intense, and this can increase prices.

Who Needs Right-Sized Housing?

The demand for smaller, more appropriately scaled housing comes from multiple directions:

Aging Boomers: The 73 million Baby Boomers increasingly seek to downsize while aging in place. Many want single-level living, lower maintenance, and proximity to services—but not necessarily nursing homes or traditional retirement communities. Most of this generation is still fairly active, fit, and important contributors to their neighborhoods. Being able to remain close to friends, family and services is important.

Young Adults: Millennials and Gen Z face unprecedented housing affordability challenges. Smaller, more affordable starter homes could provide an ownership entry point that's increasingly unavailable today.

Singles of All Ages: From young professionals to middle-aged individuals to older adults who have lost partners, single-person households have distinct needs that are rarely prioritized in housing design or development.

Empty Nesters: Parents whose children have moved out often find themselves with too much house but few appropriate alternatives within their established communities.

Reimagining Housing Development

Addressing this mismatch requires a fundamental shift in how we approach housing development:

Diversify housing types: Cottage courts, townhomes, duplexes, accessory dwelling units (ADUs), and small-lot developments can provide right-sized options while maintaining an appropriate sense of scale and building form for the neighborhood.

Revise zoning laws: Many localities prohibit exactly the housing types most needed through restrictive single-family-only zoning, minimum square footage requirements, minimum lot sizes, and other regulations that artificially limit housing diversity.

Prioritize accessibility: Universal design features like zero-step entries, wider doorways, and first-floor primary bedrooms benefit both aging residents and those with disabilities.

Focus on location efficiency: Smaller homes near transit, services, and amenities can offset reduced private space with improved access to shared community resources. They can also create opportunities for households to save on transportation costs, something that is typically the 2nd or 3rd highest expense (after housing and/or daycare) for most households.

Encourage adaptive reuse: Converting larger homes into two-family, three-family or accessory dwelling units can increase housing supply while preserving existing neighborhood character.

The Path Forward

Creating appropriately-sized housing isn't just about meeting market demand—it's about building communities that work for people at all life stages. This requires:

• Developers who recognize the untapped demand for smaller, thoughtfully designed homes
• Local governments willing to update outdated zoning codes and building regulations
• Financial institutions that support financing for innovative housing types and ownership models
• Consumers who advocate for the housing options their communities need

The great housing mismatch represents both a challenge and an opportunity. By aligning our housing development with demographic realities, we can create more affordable, sustainable, and inclusive communities while addressing one of the fundamental disconnects in America's housing market.

The houses we build should reflect the households we have—not the households of generations past.