Millennials ask: Where did all the starter homes go?

James and Carrie Finan have been house hunting in the Seattle area for four months in a seemingly futile race against time: They’re living in a room in James’s mother’s house, and their first child is due in September.

They’ve seen about 40 starter houses that match their criteria — $350,000 or less, three bedrooms, about 1,200 square feet — and made four offers ranging from $32,000 to $82,000 above asking price. They’ve lost out each time.

“Every time we hear we’re not getting it, my heart kind of sinks,” said James, 29. “It’s been insane.”

A big reason the Finans are struggling is the regulatory morass faced by builders such as Mike Walsh. On a parcel in Sammamish, Washington, a Seattle suburb, he would like to build 36 relatively affordable houses. But because zoning changes in recent years permit just 25, he’ll have to sell each at $1.2 million to make the project profitable.

An increasingly byzantine maze of zoning, environmental, safety and other requirements partly accounts for housing construction that remains 35 percent below normal levels across the country, especially for affordable starter houses, builders and economists say.

That building deficit is the chief culprit behind a skimpy supply of both new and existing homes that has driven up prices about 40 percent in the past five years, said Lawrence Yun, chief economist of the National Association of Realtors. Rising prices are good for homeowners but shut out many buyers, especially those looking for their first house.

There are other reasons single-family home construction is sluggish: Builders face shortages of lots and workers. And many have been loath to take on riskier projects since the housing bust.