The cost of housing, affordable housing, and more

[michaelskis]

Leading up to the 2008 Mortgage Crisis, home prices continued to increase because of demand. Then the floor fell out and several people quickly found that they were underwater with their mortgage. Fast forward 15 years, the costs of homes continues to rise, this time for a combination of factors including demand and the cost of construction. The difference however is that salaries have not kept up. An increasing number of people are now exceeding 30% of their income on their mortgage.

This is a hot button topic with my community because there is a lot of people who view 'affordable' housing and increased crime rates in the same light. I can see why. The crime rates in the City just a few miles down the road is some of the worst in the country, were as we are one of the safest communities. But I have staff that cannot afford to live in the community they work for. I also think of the police officers, teachers, fire fighters, and a lot of service employees that our community depends on that need to commute in from adjacent communities.

And now we see a bit of a situation locally, we have a considerably larger inventory of homes that are for sale than we have buyers in the market. There is speculation that a lot of them are waiting for interest rates to come down. From 2021 to 2023 price increased nearly 60% in some cases, and have remained even since then.

The question that I have is do you think that the overall housing market will go back down, or is this where things will remain?

The other is how can contractors build and sell reasonable quality dwellings at workforce housing prices given the cost of labor and materials?

Finally, do you think it is just a housing shortage or do you think the cost of housing to salary ratio has a lot to do with it as well?

 

[MacheteJames]

The question that I have is do you think that the overall housing market will go back down, or is this where things will remain? I think we will need a recession and significant demand destruction to get housing back down (and the new "down" will be higher than we think it should be). IMO private equity has also seized onto single family as an asset class in the last five years and this will keep the price floor higher than we want it to be. And I don't think there's the stomach for the regulatory reform needed to stop them from doing this and pushing individual households out of the market

The other is how can contractors build and sell reasonable quality dwellings at workforce housing prices given the cost of labor and materials? We are doing zoning code audits with a number of communities in this area and one of the anecdotes that multiple planners have shared is that workforce housing developers are attempting to value engineer new construction projects down to meet median wages/local purchasing power, but they can't VE any further while still delivering a viable, code compliant product to market and meeting local design standards. And, if they're getting affordable housing subsidy, the state affordable housing agency also lays out design guidelines that have further implications for cost/sf. We are going to need to see more modular housing development and at a density higher than a lot of folks may be comfortable with, to break the logjam

Finally, do you think it is just a housing shortage or do you think the cost of housing to salary ratio has a lot to do with it as well? IMO the latter is at least as salient of a factor - maybe even the dominant one. Wage stagnation has wrecked the ability of the median household to acquire housing at a price point or monthly rent that doesn't crowd out other household expenses

I just read 'Abundance' and am thinking about this stuff every single day - it gives me hope that there's a bipartisan path forward to potentially fixing this mess. One of the points the book makes is that the construction sector has a classic case of Baumol''s cost disease and doesn't innovate the way that other sectors in the economy do. Imagine if tech were stuck in the same paradigm that housing construction is today? We'd all still be using Apple IIcs and 2400bps dial up modems.

 

[mendelman]

I just read 'Abundance' and am thinking about this stuff every single day - it gives me hope that there's a bipartisan path forward to potentially fixing this mess. One of the points the book makes is that the construction sector has a classic case of Baumol''s cost disease and doesn't innovate the way that other sectors in the economy do. Imagine if tech were stuck in the same paradigm that housing construction is today? We'd all still be using Apple IIcs and 2400bps dial up modems.

Leading up to the 2008 Mortgage Crisis, home prices continued to increase because of demand. Then the floor fell out and several people quickly found that they were underwater with their mortgage. Fast forward 15 years, the costs of homes continues to rise, this time for a combination of factors including demand and the cost of construction. The difference however is that salaries have not kept up. An increasing number of people are now exceeding 30% of their income on their mortgage.

This is a hot button topic with my community because there is a lot of people who view 'affordable' housing and increased crime rates in the same light. I can see why. The crime rates in the City just a few miles down the road is some of the worst in the country, were as we are one of the safest communities. But I have staff that cannot afford to live in the community they work for. I also think of the police officers, teachers, fire fighters, and a lot of service employees that our community depends on that need to commute in from adjacent communities.

And now we see a bit of a situation locally, we have a considerably larger inventory of homes that are for sale than we have buyers in the market. There is speculation that a lot of them are waiting for interest rates to come down. From 2021 to 2023 price increased nearly 60% in some cases, and have remained even since then.

The question that I have is do you think that the overall housing market will go back down, or is this where things will remain?

The other is how can contractors build and sell reasonable quality dwellings at workforce housing prices given the cost of labor and materials?

Finally, do you think it is just a housing shortage or do you think the cost of housing to salary ratio has a lot to do with it as well?

Build more, more, more, everywhere.

SFR-det neighborhoods shouldn't be spared. And incentivize the conversion of the objectively excess office, retail commercial buildings/parking fields.

Plus, the debt providers need to be much less scared as a group/industry/profession as they are currently.

 

[Wannaplan?]

Effective solutions to addressing housing affordability in the USA is, I believe, beyond the reach of local planners and the local contractors, builders, and real estate agents. It will take a robust federal response in terms of policy reforms and appropriations to change things at the local level. If the "free market" continues on with its doctrinal laissez-faire autopilot, you know the bankers and investors and associated capitalists will continue to operate in a self-interested fashion, viewing housing as an asset and nothing more, leaving every day people searching for and never finding dignity in a place they want to call home.

 

[Faust_Motel]

The question that I have is do you think that the overall housing market will go back down, or is this where things will remain?

I don't know that prices will go down much across the board, but they could stop going up so much against inflation and sort of level off that way. In Northern New England i'm seeing more houses on the market and more price drops as opposed to a couple years ago with cash offers, "love letters" and very little even showing up on the market at all.

The other is how can contractors build and sell reasonable quality dwellings at workforce housing prices given the cost of labor and materials?

Density is the only magic wand we have right now. That and finding ways to encourage incremental development like Strong Towns describes- people building at the next increment instead of being incentivized to wait until "windfall density" is allowed. In terms of ownership units, I think modular and at scale plays a big role here- but in my corner of the country, a big development is anything with more than 50 homes in it, and only the very largest projects top 200 units. Where our statewide housing needs assessment breaks out that the community I work for with about 4600 DU needs another 4000 DU built over the next 25 years, either it's all got to be in 4-5 story apartments buildings or we'd need to expand our water and sewer districts significantly and zone for some pretty high density modular home neighborhoods. I'd love to see more row homes. I did just sign a permit for a "six pack" of one-bedroom studios that will be part of a neighborhood with housing types ranging from those all the way up to SFH on 1/2 acre lots. Applicant stated 156k/ unit to build. We need more of that.

(bedroom and full bath is upstairs).

Finally, do you think it is just a housing shortage or do you think the cost of housing to salary ratio has a lot to do with it as well?

It's both. I wish I understood "real wages" better but I do understand that the bad interest rates my parents experienced in the 1970's were somewhat eclipsed by the better relationship between their wages and the CPI and their wages and housing costs. In other words, "yes, the interest rates were awful then, but overall the cost of housing relative to wages was still much better."

I do wonder what will happen in a aging state like mine when my parents' generation truly starts moving on. In may state of 600k there are 20k fewer school-age kids than there were 30 years ago when i graduated from high school. There should be a bump of 50ish year old single family homes coming on the market in the next 10-15 years.