Do we really have a housing shortage?
We think the answer is a lot more complicated than the common narrative that suggests we're just not delivering enough units.
Put yourself in the shoes of a young, employed, and upwardly mobile person from Des Moines, Iowa.
You've always wanted to live and work in NYC right out of college, and you're on your way after landing a job that pays $100K a year. Good for you!
You've heard how expensive NYC real estate is, but surely that's for normal people. Not six-figured recent grads.
Then you look at apartments and condos. And you keep looking. And you keep riding farther and farther out.
After dozens of showings, your real estate agent quips, "You could always move to Hartford."
And here's what the we-don't-build-enough-housing narrative misses: You're not moving to Hartford.
No disrespect to our friends in Hartford, but it's simply not at the top of the list for you and your peers. Who cares if you can get 3x the space at half the cost?
It turns out that every magnet city has at least a Hartford or two. i.e., lower prices and less explosive price growth within a few hours' drive. But you're not going there.
This NYC vs. Hartford pairing shows up all over the country. An undersuppled mega-city with jobs, high-cost housing, high inflation, and relative unaffordability is frequently within a few hours of an oversupplied, deep suburban area with fewer jobs, cheaper housing, lower inflation, and more space.
So do we really have a housing shortage? Or do we have a shortage of obtainable housing in key urban areas?
The difference is more than semantical...
You fix a broad undersupply by building more units. Any time of units, anywhere. Just build them.
But the solution for concentrated undersupply is much more complicated. You have to add units where it's extremely difficult to add units: In dense areas where the cost to buy land and to build is prohibitive. Cracking the code will almost certainly require government support.
Clarification: We are NOT saying...
There's no housing problem in the U.S.
The U.S. is overbuilding.
People who want to live in NYC should move to Hartford.
We ARE saying...
Maybe we should modify the "housing shortage" narrative to account for the fact that housing challenges are concentrated in key markets where demand is exceptionally strong. Tinkering on the margins won't move the needle.
COMMENTS