Low interest rates, high salaries and membership discounts scored before and during the pandemic often can’t be matched today, binding people in golden handcuffs. Many feel comfortable, but stuck…
In matters big and small, people feel they cannot improve on their current situations. They’re mentally or emotionally ready for a change but can’t bring themselves to walk away.
This is how it can affect housing:
Their findings suggest that people with 3% mortgages today could be about 30% to 40% less likely to move than they otherwise would be, says Lu Liu, an author of the paper and a finance professor at Penn’s Wharton School.
When homeowners don’t move, that limits the number of houses that are bought and sold. And Liu found that those who locked in low mortgage rates are less likely to move in response to wage growth in nearby areas, potentially making the labor market less dynamic.
This all seems related to a basic assumption in the American Dream: life will continue to get better and better. The next generation will have it better than the current one or previous ones. Progress will continue to improve lives and outcomes.
But, what if this does not happen? Does improvement always occur over time?
The American Dream does not allow much space for stagnation or decline. There can be blips, temporary setbacks like a Great Depression or a housing crisis in the late 2000s. Otherwise, housing values should keep going up. The stock market should keep going up. Job opportunities should continue to be there. Standards of living should improve as should technology.
Whether the American Dream has peaked or whether room for improvement is limited because so much improved over the last century or so is interesting to consider. To some degree, we may not know for sure until we can look back and see the broad patterns. But, there are likely plenty of people willing to dig into the data and/or make these arguments.
The theory that the aging population would require fewer homes isn’t quite accurate. It turns out older consumers tend to prefer smaller dwellings but not fewer homes. The Barclays housing team makes the argument that currently more boomers are partly responsible for creating more households, putting pressure on housing demand…
“Hence, as an increasing share of the population shifts into older age groups, more and more households tend to be formed. That is, as a given household head ages, the size of the household (in terms of people) tends to become smaller and smaller, with children moving out and couples separating because of divorce or death,” the economist added…
“Retired people always are much more likely to be the head of a household than those in pre-retirement age. This is because a given person in this age group is much more likely to be a single head of a household, especially as they, inevitably, lose a life partner,” Millar told Yahoo Finance in an email. “The difference now is that this generation is a much larger group than the one that preceded it, which means that they demand much more housing.”
That leaves less existing inventory for the younger ones, especially millennials as they reach an age where they would form a new household and buy a house.
Do Americans have to take up more houses just because there are more people? This gets at American ideas about single-family homes and households. Is it most desirable to spread out and have numerous private dwellings? Is this also a reflection of sprawling development in the post-World War II era?
If future generations are smaller in size, they could theoretically occupy fewer houses just by having fewer people. But, they could also decide to live in different ways. Fewer detached housing units? Denser settings, even in the suburbs?
This story is not over as population changes and desires for housing are dynamic.
You can see it by looking at residential-vacancy rates, which have been as low as 2 percent in recent years. You can tell by looking at the size and price of rentals and homes for purchase: The average rent in Manhattan is more than $4,000, and the average home in Brooklyn costs roughly $1 million. You can see it in the shrinking of New York’s middle class and the stagnation of its population and the widening of its income and wealth inequality. Housing supply has simply not kept pace with housing demand, squeezing everyone except for the very rich.
The same forces shunting families to the suburbs are weighing on the migrants. The same forces driving New Yorkers out of unaffordable apartments and into homeless shelters are weighing on the migrants. Migrants cannot afford housing for the same reason that the city itself struggles to raise money for new facilities. New York really is full…
High housing costs have a way of making every problem a housing problem. A homeless person needing help with a substance-abuse disorder needs housing first. A migrant requiring legal aid more pressingly needs a roof over their head. And high housing costs, of course, force millions of vulnerable people into homelessness. “Our homeless-response system has turned into a crisis-response system,” Gregg Colburn, an associate real-estate professor at the University of Washington’s College of Built Environments, told me. “So many other systems have failed or delegated responsibility to it.”
The opposite is also true: Low housing costs make other problems simpler to solve. Cheap housing reduces the number of people who become homeless. It also allows the entities providing assistance to do more for less, because their overhead costs are lower. And it frees up lawyers to work on immigration cases, substance-use experts to work on substance-use issues, and mental-health counselors to work on mental-health issues.
It is enough to make one think that seriously and sufficiently addressing housing should be a major priority!
The problem is not just limited to New York City. Multiple big cities in the United States need more housing units and lower-priced yet good quality housing. Having a stable place to live at a reasonable price goes a long way to better life outcomes and opportunities.
But, adding a lot of good housing takes a lot of work and there does not seem to be political will to address it. Additionally, it can be easy to look for other solutions to some of the different problems listed above. Would building more good housing automatically solve these issues? No, but it could help a lot and make it more possible for people to live and enjoy major cities.
Perhaps the opponents are beginning to accept that their community is not, has never been, exclusively their own domain.
Who owns a neighborhood? In many American communities, the people who live there might feel this way. They expect to provide input and exercise some oversight of what happens in their neighborhood. They want to exercise control over their own properties and those around them.
But, they do not do this on their own. They interact with other property owners and also engage with local governments. These local governments typically represent a broader community and have regulations about what can and cannot be done in neighborhoods.
Or, here is another way to address the same questions: if every neighborhood will change over time, who gets to street this change and/or benefit from this change? Those with means and vested interests will have their own perspective and goals while a broader community might have another point of view.
This dynamic—front-yard proclamations contradicted by backyard policies—extends well beyond refugee policy, and helps explain American 21st-century dysfunction.
The front yard is the realm of language. It is the space for messaging and talking to be seen. Social media and the internet are a kind of global front lawn, where we get to know a thousand strangers by their signage, even when we don’t know a thing about their private lives and virtues. The backyard is the seat of private behavior. This is where the real action lives, where the values of the family—and by extension, the nation—make contact with the real world.
Let’s stick with housing for a moment to see the front yard/backyard divide play out. The 2020 Democratic Party platform called housing a “right and not a privilege” and a “basic need … at the center of the American Dream.” Right on. But the U.S. has a severe housing-affordability crisis that is worst in blue states, where lawmakers have erected obstacle courses of zoning rules and regulations to block construction. In an interview with Slate, Senator Brian Schatz of Hawaii, a Democrat, took aim at his own side, saying progressives are “living in the contradiction that they are nominally liberal [but they] do not want other people to live next to them” if their neighbors are low-income workers. The five states with the highest rates of homelessness are New York, Hawaii, California, Oregon, and Washington; all are run by Democrats. Something very strange is going on when the zip codes with the best housing signs have some of the worst housing outcomes.
Housing scarcity pinches other Democratic priorities. Some people convincingly argue that it constricts all of them. High housing costs pervert “just about every facet of American life,” as The Atlantic’s Annie Lowrey has written, including what we eat, how many friends we keep, how many children we bear. “In much of San Francisco, you can’t walk 20 feet without seeing a multicolored sign declaring that Black lives matter, kindness is everything and no human being is illegal,” the New York Times columnist Ezra Klein wrote. But in part because those signs sit in front yards “zoned for single families, in communities that organize against efforts to add the new homes,” the city has built just one home for every eight new jobs in the past decade.
The image here is from a single-family home, a familiar symbol and sight in the United States. The front yard is visible to others. Homeowners put certain things in the front yard and do certain things in the front yards. Meanwhile, the back yard is a more private space, often out of sight from the front and even from others with fencing, plantings, and more blocking possibly blocking views.
Is the front yard just performative? For American homes, people put a lot of effort into a lawn, a facade, signs, and more to present a particular image to the world. It is not necessarily fake or inauthentic; it is just one angle available to the public. It can affect perceptions, interactions, conversations.
Perhaps this is similar to front-stage and back-stage from sociologist Erving Goffman? In public settings, we practice impression management and we play particular roles. We perform in ways that align with or resist social conventions. Back-stage allows for less of this.
In the area of housing, I have seen what is described above: when communities have opportunities to discuss and plan for affordable housing or denser housing or cheaper housing, they often throw up obstacles. They are not necessarily opposed to the need for such housing; they just do not want it near them. Housing as an issue ends up being a hyper-local concern as community by community debates development.
Perhaps it is less about front-yard, back-yard and more about general/national versus local. It is one thing to support policies at a national level or for others to follow. It is another to commit to one’s own actions as well. Could a growing YIMBY movement supersede all the NIMBY activity?
“We have a supply problem with housing,” Marc Norman, associate dean at the NYU Schack Institute of Real Estate, told Yahoo Finance Live (video above). “We’ll see the price declines, but I think the income gains that we are seeing lately are still not keeping up with the prices that we are seeing in the market — in most markets.”…
“We, for the last 20 years, have underbuilt the housing,” Norman said. “In 2008, we saw the sort of demand go down, but it never came back in terms of supply.”
After the 2008 real estate crash, residential construction activities in the private sector never recovered to the level of 2006. Although home building slowly increased year over year during the last decade, projects remained well below early 2000 levels, according to figures from the Census Bureau and. Department of Housing and Urban Development.
Several thoughts in response:
The United States has never fully recovered from the housing bubble in the late 2000s. The rise in housing values, homeownership, and lending activity led to a lot of trouble.
How much money has the real estate and development sector made since the late 2000s? How much money has been left on the table by not building (or not being able to build, as discussed in the article, due to zoning and other restrictions)?
How many older homes are retrofitted or renovated to meet current standards and tastes each year compared to how many new housing units are needed? Both routes could help provide housing.
Americans have been through a tough few years, but I am optimistic about our country’s economic prospects. Americans’ resilience has helped us recover from the economic crisis created by the COVID-19 pandemic, families are finally getting more breathing room, and my economic plan is making the United States a powerhouse for innovation and manufacturing once again.
In the list of economic accomplishments, I could find no mention of housing. None. Zero. There could be a few reasons for this:
There is little good news on the housing front.
The new about housing is less good or clear than the areas Biden cites.
Housing is not viewed as a winning political topic.
What could political leaders do to help deliver a Christmas housing present for Americans? How can they talk about jobs, incomes, taxes, and opportunities without mentioning one of the most basic pieces of the good life in the United States: a pleasant home or residence in a decent location?
I keep thinking about the car commercials that have run for years featuring people getting new cars, SUVs, or trucks as Christmas gifts (sometimes with a bow). This might be the ultimate in Christmas consumption: a true big ticket purchase on the biggest consumer day. At the same time, Americans like cars and driving and are willing to shell out for it. Americans also like single-family homes; could someone develop a Christmas housing share gift program? Or, “give a mortgage”?
What’s going on? One problem is simply with the shape of office buildings: Their deep floor plates mean it’s hard for natural light to reach most of the space once it’s divided up into rooms. Their utilities are centralized, which requires extensive work to bring plumbing and HVAC into new apartments. Either way, they require significant architectural intervention. The older stock of prewar offices, which are better suited for residential units, have often already been converted in cities like Chicago and Philadelphia. Another issue is with zoning codes that bar housing from office districts. A third obstacle is the building code: Early residential conversions, like those in SoHo’s lofts, were usually illegal, sometimes for complicated reasons that seem less important than mandating a window in every bedroom.
What’s more, business districts don’t empty out building by building but with vacancies here and there across the skyline. You wouldn’t convert Twitter’s building, since it’s partially occupied by workers. So, in one sense, Musk’s bed stunt is an example of his already innovating at Twitter. Very mixed-use! “You’re not going to run into a building that’s 100 percent empty, ready to be converted,” said Anjali Kolachalam, a researcher with Up for Growth. She recently ran office space in downtown Denver through a filter to find good conversion targets—tall buildings with high vacancy rates and small floor plates built before 2010. She wound up with just 4 office buildings, out of the 208 total.
Finally, converting buildings to residential use is expensive. Couple that with the fact that office rents are higher per square foot than residential rents are, and you see why developers aren’t champing at the bit to get new projects underway. Van Nieuwerburgh gave me an example from San Francisco, where Juul’s old headquarters—down the block from Twitter’s improvised dormitory—is for sale for $150 million. That’s a lot less than the $397 million the embattled nicotine vape company paid for it in 2019. But at $400 a square foot to buy and another $400 a square foot to renovate, he said, the conversion would still produce a building with rents too high even for San Francisco. In other words, offices may be down, but they’ll have to fall a lot further before adaptive reuse becomes a bargain.
While the challenges are present, I wonder if someone has this figured out – this could be a company, developer, or community. Are there ways to quickly address the issues listed above or does it require a sustained effort? Imagine someone figures this out and there is a way to make some cool conversion from an exciting work space (if this is possible) or name to an interesting housing unit. If this can happen for churches and religious buildings, why not for office buildings?
If this does not work easily now, could we anticipate new buildings that could more easily switch between uses? There are ways to plan, zone, and build with more flexibility in mind so that adjustments could be made given needs and market conditions. Would it cost more to construct a building in this way? If so, perhaps the possible higher occupancy rates and the ability to adjust could bring in more money in the long term.
Looking at the number of American households and the number of vacant housing units, Freddie Mac, the government-sponsored purchaser of mortgage-backed securities, estimates a current supply shortage of 3.8 million units, driven by a 40-year collapse in the construction of homes smaller than 1,400 square feet.
The group Up for Growth also arrived at an estimate of 3.8 million, using data on the total demand for housing and the overall supply of habitable, available units.
The National Association of Realtors compared the issuance of housing permits with the number of jobs created in 174 different metro areas. It found that only 38 metro regions are permitting enough new homes to keep up with job growth; in more than a dozen areas, including New York, the Bay Area, Boston, Los Angeles, Honolulu, Miami, and Chicago, just one new home is getting built for every 20-plus jobs created. The NAR estimates an “underbuilding gap” of as many as 7 million units.
These numbers draw on data such as vacancy rates, household-formation trends, and building trends. But none of the estimates capture what I’ve come to think of as the affordability gap: the difference between the housing we have and the housing we would need in order to ensure that working-class people could once again live in our big coastal cities for a reasonable cost. Freddie Mac does not purport that building 3.8 million units would make New York accessible to big middle-class families and end homelessess in San Francisco. The National Association of Realtors is not contemplating whether janitors can walk to work in Boston…
To come up with that estimate, the two economists built a complicated model that assumed Americans could move wherever their wages allowed and the housing supply would adjust as it would in a place with typical permitting standards. In such a world, they estimated in some associated work, 53 percent of Americans would not live where they are currently living. San Francisco would have an employed population 510 percent bigger than it does today—implying an overall population of something like 4 million, rather than 815,000, with 2 million housing units instead of 400,000. The Bay Area as a whole would be five times its current size, the economists estimated. The average city would lose 80 percent of its population. And New York would be a startling eight times bigger. Some back-of-the-envelope math (mine, not theirs) suggests that the United States would have—deep breath here—perhaps 75 million more housing units in its productive cities than it currently has.
Considering such big numbers can be both helpful and daunting. The sheer size of these figures – multiple millions to tens of millions – highlights the scope of the problem. Housing is not a small issue; it is a large issue that needs addressing. Big numbers can help convince people this is an important social issue to address. On the other hand, these figures are daunting. That is a lot of housing units to consider. How can small efforts contribute to such a big need? Who can address this?
Even if the various methods and experts above do not agree on the same numbers, together they suggest much needs to be done. Can we get a commitment from states or cities to approve more units proportionate to their populations? I could imagine some kind of pledge drive and counting system to see the progress toward a sizable goal. Or, how about a long-term plan on the scale of a Manhattan Project or a space race to get units built? Of course, addressing housing at the federal level is difficult.
In housing circles, one hears a lot of self-righteous discussion about the need for more preservation. And many American homes doubtless deserve to stick around. But the truth is that we fetishize old homes. Whatever your aesthetic preferences, new construction is better on nearly every conceivable measure, and if we want to ensure universal access to decent housing, we should be building a lot more of it…
In the meantime, we’re stuck with a lot of old housing that, to put it bluntly, just kind of sucks. A stately Victorian manor in the Berkshires is one thing. But if you live in a Boston triple-decker, a kit-built San Jose bungalow, or a Chicago greystone, your home is the cheap housing of generations past. These structures were built to last a half century—at most, with diligent maintenance—at which point the developers understood they would require substantial rehabilitation. Generally speaking, however, the maintenance hasn’t been diligent, the rehabilitation isn’t forthcoming, and any form of redevelopment is illegal thanks to overzealous zoning.
You might think uneven floors or steep stairwells have “character.” You’ll get no argument here. But more often than not, old housing is simply less safe…
The fact is that those much-lamented cookie-cutter five-over-one apartment buildings cropping up across the U.S. solve the problems of old housing and then some. Modern building codes require sprinkler systems and elevators, and they disallow lead paint. New buildings rarely burn down, rarely poison their residents, and nearly always include at least one or two units designed to accommodate people in wheelchairs.
And despite what old-home snobs may believe, new housing is also just plain nice to live in—in many ways an objective improvement on what came before.
New housing does indeed have features, including aesthetic choices and functionality, that often better suit current users. Safety can be a persuasive argument. And there certainly is a need for more housing units in many locations.
However, continuing to use, rehabbing or renovating, and preserving housing can sometimes address these concerns and provide continuity in structure and character. We often tie concepts like stability, tradition, and permanence to housing units, even if they are not the best construction or something better comes along later.
What would be interesting to see is if one American city or region was willing to commit to building new housing in the way described in this piece. If there is there is the will and resources to construct plentiful, attractive, and safe new housing and not fix up or save older homes, what would happen?How would it transform everyday life and society?
One aspect of this debate that I wondered about: is it greener to build a lot more new housing or to rehab existing housing?
Legally Sociable 