Why is U.S. housing so expensive?
Politicians seem to have the answers...
-- Greedy corporate landlords
-- Not enough sites
-- Not enough affordable homes
-- Too many Illegal immigrants
-- Restrictive zoning
-- High downpayments
-- Restrictive financing
Mark Zandi, similarly recently provided the following summary:
"The cause of the rising cost of housing is not a mystery: We simply don’t have enough affordable homes for rent or for sale. We have enough homes at the top of the market — homes that wealthy families can afford. But we don’t have enough homes for sale that aspiring homeowners can afford, or enough to rent that working families can afford. We estimate that, all told, the nation is short approximately 3 million homes, almost entirely in the bottom half of the market."
From "Harris plan could solve the longtime affordable housing crisis," Washington Post editorial (8/21/24)
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Here's what they're missing...
1. Plenty of available apartments:
There are 1.6 million vacant multifamily units in the U.S., an increase of about 10% over the last 12 months.
2. Plenty of available single-family homes:
The inventory of unsold new homes has grown meaningfully over the last year and sits more than 2x higher vs. post-Covid's tight market.
3. Zoning doesn't move the needle:
One of the largest multifamily owners (EQR) owns more than 20,000 units in southern California, where ADUs are more viable. EDR estimates that it might be able to add 350 units via redevelopment.
4. Are housing costs a top concern?
[We were surprised by this one...]
Gallop polls Americans every year on what they're worried about economically. Housing concerns are relatively elevated, but not at an all-time high and most survey respondents aren't at risk of not being able to cover their housing costs.
5. Only 1% of U.S. homes are owned by illegal immigrants:
Illegal immigrants don't move the national housing needle.
6. Rent caps don't work:
Most researchers have concluded that, at best, rent caps don't make housing more affordable and, at worst, exacerbate affordability challenges.
7. Homes are expensive to build:
This is the most important point. The cheapest apartment in a large market likely costs $250K+ to build. The cheapest single-family home is similar in cost in a far-out suburb. Add another $100-150K to that cost if you want to deliver a home in an infill-ish suburb.
Bottom line: Housing is a complicated problem. Don't buy the simple solutions.
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