Ive heard repeatedly when trying to learn about our housing situation that we don’t have enough homes. I don’t understand how that’s the case or if it’s even true. Who or what is stopping more homes from being built exactly? If the demand is so high and the supply is so low then the suppliers would obviously ramp up production, right?
In: Economics
There’s a lot to unpack here and several people have brought up good points already, so I’ll try to cover some different aspects.
Part of it is housing based on location, part of it is affordability. There are plenty of other aspects as well, but other people have already covered those fairly well. Housing is going up left and right, but is it in every place where there’s demand? Is it going to be $150k houses or $400k houses? What ordinances are going to restrict the availability of newer housing further, like higher square footage minimums or property acreage? If all the new jobs are popping up in one city, is housing an hour commute away going to solve the housing problem in the city creating those jobs? How much of the new construction is going to be new homes to buy as opposed to rentals?
Yes, there’s regulatory issues like approvals for every little thing (that likely exists from older problems). Where I live, zoning is used to keep trailer parks away from the high-end subdivisions and keeps strip clubs from opening up. Every three years or so, they increase the minimum square footage of new homes built in new subdivisions. A place designed for sewer never got sewered, so now any new subdivision that can’t get sewer immediately needs to cover that somehow, which typically means more land per house. Depending on how many lots you’re developing, you may have to add more infrastructure like sidewalks. And those regulations are going to increase and get more complex as new issues and abuses arise over time.
So now you have developments that could take months to build out waiting (let’s say hypothetically) a year to even break ground. You have inspections of water and sewer lines before they are buried (fun fact, this is a very common delay in my area because they are supposed to be X feet apart with the water line higher to reduce risks with contamination if there’s a break but they get put in the same trench often). And if there’s a required minimum for stuff, a planned 40-house development might turn into a 30-house development. More often than not, someone tries to cut corners and gets caught by all the inspections and regulations put there to stop them, which doesn’t help. Othertimes, someone exploits a new way to skirt these things and creates a new problem (and eventually, a new rule everyone has to follow going forward) to make sure things take even longer.
I think my pastor summarized the cost part best, pre-COVID. “I’m seeing all these new subdivisions popping up around the church, but they’re asking for $400k or $500k for a three-bedroom house. Just how many new doctors, nurses, and lawyers are moving into the area to afford that? How many new, young families are going to move to this area and come to this church? How many college kids are going to graduate and be able to get into one of these new homes?”
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