As noted exiting January 29's "Majorities see education, housing as unaffordable: Survey":
Speaking of government money, you could crash the housing market with a program to build a million starter homes per year for a half-decade but that probably isn't politically palatable....
And from the Washington Post, February 4:
Experts say the U.S. needs an additional 2 million to 20 million homes to fix the shortfall, underscoring the challenge of meeting the nation’s housing needs.
Then there are the economists who contend there’s no shortage at all.
The disparate projections reflect the challenge of quantifying the nation’s housing needs, a puzzle that rests on assumptions about how much a home should cost, how many people it should hold and how big a footprint it should have.
Vacancy rates and missing householdsWith housing affordability a crucial political issue and increasingly out of reach for many Americans, determining the nation’s needs is not merely an academic exercise but is key to devising policies that will solve the problem.
The U.S. has 146 million homes, Census Bureau data shows. Of those, 8.1 million are “doubled up” households, meaning people are sharing space with non-relatives. Zillow’s housing estimate assumes most of those people would prefer having their own place. There also are 3.4 million vacant homes available to rent or buy, the real estate website says. So Zillow economists subtracted the number of available homes from the number of doubled-up households and concluded that the nation needs 4.7 million more homes.Several analyses zeroed in on two questions: How many homes should be vacant, and how many consumers have delayed striking out on their own because of the cost?
Though it might seem counterintuitive, a healthy housing market needs vacancies. An empty property could signal it’s between tenants or buyers, for example, or under renovation. Or it could mean the owner is splitting time between properties; according to the National Association of Home Builders, more than 6 million homes — about 1 in 20 — are secondary residences.
What constitutes a healthy level of vacancies is harder to define, as experts put it anywhere from 3 percent to 13 percent. After home construction cratered following the 2008 housing crash, vacancy rates slumped to the lowest level in nearly two decades, falling to less than 1 percent of owner-occupied dwellings and 5 percent of rental units. They have yet to fully recover.
The optimal home number could be as simple as one for every household, plus a certain number of vacancies. But what if we don’t have an accurate count of households?
When housing costs are prohibitive, adult children tend to reside with their parents longer; in 2023, 18 percent of adults 25 to 34 were living in a parent’s home, compared with 8 percent in the 1970s, according to a Pew Research Center report.
For many economists, that suggests the equation should be: the number of existing households, plus the number of homes that should be vacant, plus the number of households that would naturally come into being if there was enough inventory to lower prices.
Yet different researchers using this framework still came up with different answers for the housing shortage.
Moody’s Analytics and PolicyMap say it would take 800,000 homes to reach the equilibrium of the U.S. housing market between 1985 and 2000. Add 1.2 million “pent-up households,” those that haven’t formed yet, and the conclusion is the U.S. needs an additional 2 million homes.
Brookings’s calculation aims to get back to the 2006 vacancy rate of more than 12 percent, when it was near its historic peak. It used a complex statistical model to tease out how much of the decline in household formation since then is due to home prices instead of other factors, such as young people having trouble finding jobs or marrying later. As a result, it concluded the U.S. needed 4.9 million more houses.
Other analyses along these lines include Freddie Mac’s, which calls for 3.7 million more homes. Goldman Sachs analysts tried the “vacancies plus pent-up demand” approach, as well as a mathematical model to determine how many homes it would take to make ownership as affordable relative to income as it was in the 1990s. Both equations worked out to between 3 million and 4 million homes. McKinsey added up new households and vacancies, plus enough housing to address homelessness and replace overcrowded homes with more than one person to a bedroom, to get to 8.2 million.
Envisioning an unconstrained market
A 2022 congressional report took a different tack. Most analyses attempt to re-create some semblance of the housing market two, three or four decades ago. But Republicans on the Joint Economic Committee argued that the correct number is equal to the number of homes that developers would build had they had no regulatory constraints — no permitting or zoning rules that prohibit them from building what customers want....
....MUCH MORE
Very related, the Federal Reserve Board's manipulation of mortgage rates by buying mortgage-backed securities: it's the interest rate teeter-totter, lower rates meant higher prices.
And as the production of homes stagnated, particularly in locales that use zoning laws to keep certain populations outside the city limits, the problems compounded.
From October 2014's "San Francisco Is Smarter Than You Are":
Depending on the source, San Francisco's population is between 6.0 and 6.6% black vs. 14.2% for the country as a whole. S.F. city and county use zoning laws to keep black folks out.
The same goes for Seattle and Portland. Someone should do a story on it....
As recapitulated in November 2021's "Meanwhile, In San Francisco (a mini-rant)".
