They Don't Build Them Like They Used To: The New Construction Shortage
zillow.com
zillow.com
[1] https://www.census.gov/construction/nrc/pdf/quarterly_starts...
Everywhere I see new construction, even out in the exurbs, it’s 3-story apartments and ugly row homes squished together on postage stamp-sized lots.
The problem around the Redmond, WA area is that if you want the lifestyle you describe, despite lots of new houses going up you will still have to have something built in the 80s. Because everything being built is 3200 sq. ft. or more. Now, I understand why, because you get more money from a $1.3MM house than you do a $800K one. But if you don't want some monstrosity with a postage stamp lot (because the house took it all), good luck finding one in Redmond. They're building houses, but nothing I'd personally want to buy.
But I take your point. Our little rambler is a hidden gem that will be worth millions when the trend swings the other way. :-)
You can look at the raw data and see single/multi/large residential starts: https://www.census.gov/construction/nrc/pdf/bpsa.pdf
Single family construction is the canary in the coal mine because the costs are escalating to the point where more and more people are priced out. New construction is $150-275/sqft (10% more if no garage is present). When I started working in 2000, it was about half that. Per-unit costs drop with multi-family, but it's still creeping up there. The minimum price for finished new construction condos in my area (which is usually a 50th percentile market in the US) is about $350k.
It doesn't matter what's efficient if it's what is in demand.
For example: sulphur dioxide emissions. You can't just pump unlimited sulphur dioxide into the air, because that's a burden to society, but there's some level of emissions that's considered "safe", so you just issue permits to create those emissions and let those permits be traded on the open market. If your business requires pumping sulphur dioxide into the air, fine, but you have to pay the costs of doing that.
A similar approach can be made for anything, ranging from non-renewable resource consumption to CO2 emissions to the public costs of maintaining infrastructure. The beauty of this is that we don't have to act like commissars arguing about whether to restrict the availability of meat or single-family homes or pickup trucks or anything else. If it's more expensive for society to support a single-family home, the tax structures should reflect that fact, so if someone still really really wants a single-family home and they can afford it, at least we can rest assured that they're paying their fair share for all the resources and externalities involved.
But certainly public policy can and should play a role here. The point is, just saying, "Well, your decisions impose a burden on everyone else" as though that were the end of the discussion proves too much. You have to lay out the costs and benefits.
But high home prices in a tech center can bring medium to long term system level benefits, too. They help distribute work options and wealth generation to other cities. If one builds monster high rises to house 20M people in urban SF it might still suck in young smart engineers two decades from today. But if instead you price them out, they might gravitate to other, cheaper cities and help those thrive. It is painful to be priced out of the city where ones job is, but with jobs plentiful it is also an opportunity to look elsewhere. One might end up happier in the end. My 2c.
Unfortunately developers is live to fill every space in with small flats to sell more of them and with high rises likewise. As long as pricing holds up.
The thing that cannot be provided with single homes is services availability, since they cannot be built close at all. This necessitates big road infrastructure and pedestrian hostile design.
Agreed on both points. And IMO, the second part quickly negates the advantages. What I have seen is that once you start on high rises sooner or later (usually during property price peaks) we have most green areas built over and what is left is either far far away or feels like an overcrowded zoo between concrete walls.
On pedestrian hostile design -- the small city I live in has sidewalks practically everywhere and while I do drive to the store from my condo I can walk to my work. And if I drive, the short, non-congested, <2 mile trip is still a pretty efficient commute. And my kids can still play outside with other kids with no playdates arranged weeks in advance.
Urban life can be pleasant and good for society, too; but small towns and suburbs are not an evil it is often portrayed to be.
Need is a terrible way to characterize what people live in.
Of course they're wasteful, it's also why people don't live on large estates anymore. People in many territories live in high-rises due to a variety of other reasons, usually a local governing drive for higher density because it's obviously more efficient, but the thought of "what's the minimum I need to live in even if I can afford more" is not usually one of them.
I hate this "need" argument because it's nonsensical and just ends up being turned into whatever living accommodations the arguer thinks is best. Minimum living space is well studied and it's shockingly smaller than even most of the arguers making a need-based argument would be willing to admit.
There’s a lot of noise here about how houses are fundamentally wasteful, we should all be living in apartments, etc. Thats all reflective of a young audience dealing with reality.
Houses are no more or less practical than they were in 1978. The difference is that on average, each household today is poorer than the last two generations in real terms.
Realistically, there's no way the rate of construction of single family homes in a finite amount of area is going to stay fixed or keep increasing over time.
The alternative is create an overload of urban sprawl, which expands the "metro area", and also increases commute times.
Of course, there's probably some survivorship bias there. All the shitty homes from the 40s are gone now.
We used to see 350k manufactured home units sold per year in the US throughout the 1990s. That fell to ~50,000 for '09-'12. Now back up to 100k units again.
There used to be a stigma about these types of homes in regards to quality. I was surprised at how relatively nice they are now, looking at the Clayton Homes site (a subsidiary of Berkshire Hathaway). I would think these types of inexpensive housing units are a critical element to relieving the US housing shortage again.
https://www.bloombergquint.com/business/2018/08/16/cheap-and...
I grew up in a region where these were incredibly common. Most of my friends grew up on one of these (doublewides, as they were called). They were actually very nice, the build quality was decent, it was incredibly spacious for the price, and they could be installed pretty fast. For about $60-70k in '95 dollars (105-120k today) a family could live in a brand new 2200 sq. ft. house on 2.5 acres of land.
- done well
- done on time
- done within budget
Pick two.
They also cannot do 3 as the budgets are super tight already.
One of the things we need is to abolish things like HOAs and historic districts; and then reform lending so it will fund environmentally-friendly building codes.
Building Affordable Housing: Where Has the Entry Level House Gone?
http://urbankchoze.blogspot.com/2016/08/building-affordable-...
If people with modest budgets could afford to pack up and move to Columbia, Missouri, then the cost burden of housing could be mitigated somewhat. We'd probably see housing prices stabilize across the country. As it stands, only wealthy people can afford to migrate across the country, usually in pursuit of even more wealth. This just adds to the problem because it results in more dollars chasing a supply of existing houses that isn't expanding rapidly enough.
Probably, the only way to reverse this trend now is to raise property taxes on single family homes in desirable locations such that it becomes uneconomical to maintain them as such. Then these massive tracts of suburbia can be bought up by developers who are incentivized to build high-density housing. Of course, a serious proposal of this sort is likely to get you killed.
The whole article is a good read but the thing that feels most pertinent is the idea of dynamic zoning; instead of zoning an area for single family residential you'd essentially zone areas such that new construction rules would be:
- allowed_height = max(2, ceil(avg_area_height * 1.5))
- allowed_occupancy = ceil(avg_area_occupancy * 1.5)
And then without the need for zoning exemptions and political zoning fights, you let neighborhoods up zone themselves organically based on demand. Average building two stories? You can build a three story low rise. Average height three stories? You can build a five story replacement.
I think lowering the barriers to higher density in-fill would effectively accomplish what you're aiming for while side stepping some of the political issues you've foreseen with raising taxes on people until they're forced to leave their homes.
[0]: http://urbankchoze.blogspot.com/2014/05/how-to-make-urban-ho...
I'm not sure if it's an issue with modest budgets or if it's an issue with job availability. Lots of people can pack up and move to Columbia, Missouri. But the jobs that exist here don't exist there.
If anything, being extremely poor helps with mobility. If you're living off disability, there's a pretty decent payoff to buying a Greyhound ticket to an area with cheaper rent, because you get the same disability check no matter where you live. Homeless people are similarly extremely mobile. It's the whole middle-class, have-to-work-for-a-living-and-my-job-is-right-here lifestyle that inhibits mobility.
> Probably, the only way to reverse this trend now is to raise property taxes on single family homes in desirable locations such that it becomes uneconomical to maintain them as such. Then these massive tracts of suburbia can be bought up by developers who are incentivized to build high-density housing. Of course, a serious proposal of this sort is likely to get you killed.
This kind of happens implicitly with a Land Value Tax, except there might be ways of implementing an LVT that wouldn't immediately displace single family homeowners.
Also, you don't need "massive tracts of suburbia" to build high-density housing; the whole point of high-density housing is that it doesn't take as much land. You can just leave most of suburbia alone.
People with money can find apartments or stay in hotels. People in my situation needed money for a place to stay before they could get a job.
Assuming supply (in the economic sense) was constant; if supply was dropping, then prices could go up even with demand dropping.
I assert that homebuyers in the newest growth segment that can produce homebuyers (born in 1990 or later) are a steadily decreasing population, something Zillow fails at all to consider as a possible cause, even as NYT and WaPo publish articles showing that same generation as destitute compared to their parents at that age.
(FHA loans require two yesrs of continuous employment and of average wage earned throughout that time. Working for Instacart and Uber, as many of them do, will not likely qualify as either employment or sufficient average wage.)
Signs are pointing toward a correction in the home price insanity, hopefully this will make things more affordable for everyone.
1) Trump put tariffs on Chinese imports
2) The Chinese retaliated by devaluing their currency, to negate the effect of the tariffs
3) This had the net effect of strengthening the US dollar
That's why home prices are flat-ish in 2018.
Besides, the RMB hasn't been devalued (as in the standard definition, which is creating a new currency and dropping a few zeros). It has risen from 6.29 RMB to 1 USD in April to 6.86 today, but that is +10% and the tariffs are +25%. But a year ago the RMB was 6.68, so the year-over-year increase is +2.6%.
Of the four assertions, only #1 is correct.
This is ignoring the fact that a strong dollar makes real estate in the US a much, much more attractive investment. Not only do you get a decent appreciation in real value if you own in a desirable areas, but you also enjoy the relative appreciation in value relative to the currency you buy goods in. Chinese investors holding real estate in the coastal USA have done quite well in the past decade.