Housing Crisis? Real or Imagined
Is there a housing crisis, or is the nature of housing just changing?
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There has been a lot of talk about “the affordable housing crisis” the past few years. On and on it goes, no one can afford housing. While the cost of housing is extremely high in the United States, maybe the nature of our relationships and culture are changing more than we realize and we need to adjust our housing expectations.
Maybe we need to change our expectations about what our housing options should be given the massive cultural changes over the past 30 years?
Is the picture of the perfect “home” the same as your grandparents picture of the perfect home? Should that “perfect” image be updated to reflect 2024/5? Maybe it should be a duplex or an apartment?
This is another way of saying, does every family need a single family home in the suburbs a short 20-30 minute drive into “downtown” with a 1/4 acre lot and a white picket fence? And more than that does everyone need to own their home?
Yes it would be nice if all of this was available to everyone, but our culture has changed our expectations about housing should adapt and change as well.
The Exurbs
A recent article on NBC News talks about how rural communities are being transformed by families and couples seeking affordable homes out into the Exurbs. Places like Celina, Texas which used to be a small cow town now has tracts of homes being built in what used to be pasture land. Link here. Is that a bad thing? It sounds a lot like the “progress” of yesteryear.
Employees can now work remotely at least part of their workweek. So why isn’t this a good option?
Zoning - Inclusionary and Other Solutions
Zoning ordinance changes can and should be used to improve the housing situation.
In a recent article Missoula Mayor Andrea Davis speaks about how, zoning played a huge role in causing the housing crisis and it should be used to help solve the problem as well. Link here. This is common sense solution and it sounds like some good leadership on her part.
A friend and colleague of mine, Douglas Landry of Langan Engineering in Boston, MA recently posted about housing and “inclusionary zoning” as a part of the problem when it comes to affordable housing. Here he points to how the cost to conform to requirements in zoning to create higher costs for development and thus higher rents for those renting “market” rate units. His post credits an article by Scott Van Voorhis for inspiration. Scott’s SubStack post is here.
Meanwhile according to Re:Venture Consulting and the University of Michigan Consumer Sentiment Survey, right now (late 2024) is the highest level of pessimism towards buying a house…ever. That’s a historic high for low sentiment. Link here.
So how do we solve the sentiment problem and address the challenges with higher rents and lack of available housing?
It is pretty clear the solution for affordable housing is not going to come from inclusionary zoning.
Well it seems local Massachusetts towns haven’t gotten the memo. Developers are now being forced to designate up to 15% of their new apartment units as affordable in suburban towns. These types of mandates will never actually create enough housing to meaningfully impact the supply. And requiring developers to build more affordable units, say over 20% will just result in developers not building more units.
I fully support taking action to try to “solve” the affordable housing problem. That can come in many forms and I do believe much of the “inclusionary housing” ordinances are based in “good intentions”.
But ultimately the market will have to regulate itself to bring down the cost of housing. Selective removal of zoning restrictions against density will result in more units, thus more affordable units will be available. This has been shown over and over again in places that have much lower development restrictions and can be seen in places like Florida and Texas now where rents are falling far faster than in places like Boston.
Here is Senator Tina Smith of Minnesota, she seems to support this idea in her post below. Link here.
So the solution is….
MORE HOUSING SUPPLY = LOWER RENTS AND HOME PRICES
Solutions I believe would help mitigate the costs of housing include allowing the construction of Affordable Dwelling Units (ADUs) on single family lots, up-zoning single family in urban areas to multi-dwelling (2+ units), and raising the density, FAR, and allowable heights in zoning.
Along this thread of thinking in regard to places like Los Angeles, Ramit Sethi notes below that the “crisis” is pretty simply too much single family zoning (74%!). Link here.
It’s not complicated….except it is political, which is of course complicated.
The transition to a new type of housing and a new cultural milieu is painful and raw for many people.
And of course cities and neighbors push back on concerns about the impact on traffic and school systems. These can be legitimate concerns that need to be addressed…but increased tax revenue should be used to address them if there is a material impact.
There is no simple solution to this complex problem, but again I have to ask is it a problem? Or do we just need to adjust our expectations?
Cheers,
John
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What We Are Reading This Week
NBC News - The Affordable Housing Shortage is Reshaping Parts of Rural America
Goldman Sachs - US house prices are forecast to rise more than 4% next year
The Real Deal - Will Trump 2.0 be good of real estate
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Great read John. WaPo did an excellent report on how the townhome is beginning to take shape as the dream home for Americans for many of the same reasons you state: low cost, low maintenance, not excessive, etc.. single family detached is great and all and a big yard may have been our parents’ generations’ dream, but that’s slowly falling out of line. Plus, townhome construction is a great way of building with density while still preserving that “independent feel” one might not get in multifamily.
Excellent analysis. I particularly liked the point about a shifting expectations for housing. What is appropriate now should be different than what was optimal for prior generations. The zoning issue is also fascinating.