Owning a home has long been the America dream. Has that possibility vanished? If not gone it now requires us to be older. We can buy a house as soon as we can afford one. 10 years ago, at 31 years old, you could afford to buy a house, today to have the income needed to do that you must be 40 years old. How have people gotten priced out of the housing market.
Supply and demand, too few homes, is part of the problem. How many more homes are needed? Estimates of the lack of available housing for our country are in the millions. Build more houses is only part of the solution. Addressing affordable housing, we must distinguish between housing affordability, the cost of a house compared to income, from affordable housing, meaning subsidized housing for people who cannot afford market-rate housing. Supply and demand are often the primary focus, our starting point. There are not enough homes for sale to meet the number of people looking to buy in certain areas. This mismatch is driving up prices across the country, even as some buyers stay put due to mortgage rates and overall costs resulting in fewer existing homes on the market. The economy becomes the place to blame.
Next blame the cost of construction which has increased significantly. The cost of building a new home can range from $137,901 to $523,890, in addition to the $3,000 to $150,000 it may cost for land. In 2024, construction cost was 64.4% of the price of a new home, up from 60.8% only two years earlier which is the highest share according to the National Association of Home Builders. One reason behind this is higher inflation resulting in higher cost for building materials. Costs increase due to material, transportation as well as competition for tradesmen and construction workers.
Investor activity affects the housing market by removing housing from local housing markets. Large investors and corporate landlords are buying up single-family homes, apartment buildings, and even mobile home parks, driving up prices and rents in the process. In many cases, these properties are turned into short-term rentals or kept vacant as investment assets. This speculative activity reduces the number of homes available to renters and buyers, especially for communities struggling with the amount of housing for purchase or rental. As investors focus on profits neighborhoods and communities are often left behind, according to the Institute for Policy Studies.
Is the lesson learned that only policies that raise supply (or decrease demand) will make housing more affordable? Adding market rate housing, even expensive housing, should improve affordability by allowing wealthier people to move into a new house, which frees up their old house for sale making more housing available. Not knowing how housing markets work will result in placing blame in the wrong place.
We see that housing cost increases are caused by material and labor costs, land cost, infrastructure, investors who buy properties, financing which places blame squarely on inflation. Most housing costs articles often if not always place the blame for our housing affordability crises on regulation, government. The function everyone blames, few challenge and many accept. Often regulation is the scapegoat. When developers and builders claim regulation is a major problem I understand but respectfully disagree. Any regulated industry will find fault with the regulators. That is human nature, but it does not make it correct.
Land use regulation is due to the need to ensure safety, compliance with design codes and compatibility of uses. Building codes, fire codes even elevator codes are essential. Let me clarify the importance of these codes. Viewing these as a reason for increased costs of housing is incorrect. Regulators should be viewed like the need for design and construction personnel. There is a certain cost in producing a product for doing business. Ensuring compliance with both construction standards and specifications is as important as the life safety and community values being confirmed.
A plan review process takes time just as designing a building takes time. This review is detailed and covers many areas; the height and width of steps, does the swing of a door interfere with exiting in an emergency? Are exits spaced as required for emergencies, are handicapped accessible bathroom available, are the doorways adequate for wheelchairs, can elevators accommodate a stretcher, and the list is extensive? We may hear complaints about the government reviewer’s comments and review time but seldom hear that the plan reviewer’s comments were incorrect.
Land use is different because we are all experts on zoning, but are we? Zoning was confirmed by the US Supreme Court in 1926 in the case of Euclid vs Ambler. There have been many court actions over the years both affirming and limiting municipal zoning actions. A more common zoning complaint now is lots are required to be so large it significantly increases the cost of housing and that zoning codes are outdated, still viewing development as if it were the 1970’s.
Zoning nationally has not buried its head in the sand. Are there ways to improve land use regulations? I am certain there are. Typically, single family zoning allows 3.5 units per acre. That is low density. Infill and middle housing are a major focus of planning today and have been for some time. One major concern is lot size. Some areas with some exception may limit development to 5-acre lot size due to lack of public water and sewer connections or a lake or aquifer.
Recently in the area where I live a mixed-use development was approved. The site plan depicted; Single family homes sized at 4000 square foot lots and 40 feet of frontage. The code specifies 5000 square foot lots with 50 feet of frontage. This project was met with substantial opposition from some neighbors. Their primary objection was traffic through and around their neighborhood. This NIMBY, not in my backyard, is certainly common and justified. Developments that generate this level of opposition cause developers to seek land further out. This results in urban sprawl and “leapfrogging” which leaves tracts of land vacant. More troubling due to sprawl is public resources are redirected to fund new infrastructure that supports suburbs and exurbs, leaving existing communities with diminished services. Despite these troubling trends, local officials approve such developments claiming the need for more housing and lower construction cost. Yet these developments rarely include sufficient affordable housing particularly, lower cost housing.
Based on my time working in the public and private sectors about land use, the blame has not changed. It is always too much regulation. Remember regulations do add costs to housing, most necessary costs for safety, quality of life and a sense of community. The time is past due when we must fix the problems rather than fix the blame. Our problems are man-made and therefore can be solved by man. President Kennedy advised us in 1963 “and man (or woman) can be as big as he wants. No problem of human destiny is beyond human. Man’s reason and spirit have often solved the seemingly unsolvable and we believe they can do it again.” Now is the time.
Phil's Personal Perspectives 