Multiple factors behind the decline in starter homes in the United States

The starter home has disappeared from many housing markets:

Photo by Scott Webb on Pexels.com

The affordable end of the market has been squeezed from every side. Land costs have risen steeply in booming parts of the country. Construction materials and government fees have become more expensive. And communities nationwide are far more prescriptive today than decades ago about what housing should look like and how big it must be. Some ban vinyl siding. Others require two-car garages. Nearly all make it difficult to build the kind of home that could sell for $200,000 today…

Nationwide, the small detached house has all but vanished from new construction. Only about 8 percent of new single-family homes today are 1,400 square feet or less. In the 1940s, according to CoreLogic, nearly 70 percent of new houses were that small…

But the economics of the housing market — and the local rules that shape it — have dictated today that many small homes are replaced by McMansions, or that their moderate-income residents are replaced by wealthier ones. (A little 1948 Levittown house on Long Island, the prototypical postwar suburban starter home, now goes with a few updates for $550,000.)…

The simplest way to put entry-level housing on increasingly expensive land is to build a lot of it — to put two, three, four or more units on lots that for decades have been reserved for one home.

The costs – financial, regulatory – are too high for the construction of lots of starter homes. The proposed solution is to try to reduce those costs by placing multiple residents on one lot and/or increasing density in communities and developments.

How to change all of this is difficult given the difficulties of addressing housing in the United States. The need is great, particularly when affordable housing is not aimed at a larger percentage of the population who would benefit from a cheaper residence.

I wonder if the best path forward is for certain communities to pursue starter homes successfully and show that it is possible. Of course, one danger is that even if it works well in some communities, other communities might leave the burden of such housing to a small number of communities. However, if starter homes can be constructed in such a way that they are perceived as an asset to the community and not a threat to property values, they might catch on. Are there several communities that would fit the bill?

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