Housing Affordability on the Rise. Courtesy of Seeking Alpha.
Dear Commons Community,
The Atlantic has a featured article this morning reviewing the cost of housing in the country. Here is an excerpt.
“Something is happening in the housing market that really shouldn’t be. Everyone familiar with America’s affordability crisis knows that it is most acute in ultra-progressive coastal cities in heavily Democratic states. And yet, home prices have been rising most sharply in the exact places that have long served as a refuge for Americans fed up with the spiraling cost of living. Over the past decade, the median home price has increased by 134 percent in Phoenix, 133 percent in Miami, 129 percent in Atlanta, and 99 percent in Dallas. (Over that same stretch, prices in New York, San Francisco, and Los Angeles have increased by about 75 percent, 76 percent, and 97 percent, respectively).
This trend could prove disastrous. For much of the past half century, suburban sprawl across the Sun Belt was a kind of pressure-release valve for the housing market. People who couldn’t afford to live in expensive cities had other, cheaper places to go. Now even the affordable alternatives are on track to become out of reach for a critical mass of Americans.
The trend also presents a mystery. According to expert consensus, anti-growth liberals have imposed excessive regulations that made building enough homes impossible. The housing crisis has thus become synonymous with feckless blue-state governance. So how can prices now be rising so fast in red and purple states known for their loose regulations?
A tempting explanation is that the expert consensus is wrong. Perhaps regulations and NIMBYism were never really the problem, and the current push to reform zoning laws and building codes is misguided. But the real answer is that San Francisco and New York weren’t unique—they were just early. Eventually, no matter where you are, the forces of NIMBYism catch up to you.
The perception of the Sun Belt as the anti-California used to be accurate. In a recent paper, two urban economists, Ed Glaeser and Joe Gyourko, analyze the rate of housing production across 82 metro areas since the 1950s. They find that as recently as the early 2000s, booming cities such as Dallas, Atlanta, and Phoenix were building new homes at more than four times the rate of major coastal cities such as San Francisco, Los Angeles, and New York, on average. The fact that millions of people were being priced out of the locations with the best jobs and highest wages—so-called superstar cities—wasn’t ideal. But the Sun Belt building boom kept the coastal housing shortage from becoming a full-blown national crisis.
No longer. Although the Sun Belt continues to build far more housing than the coasts in absolute terms, Glaeser and Gyourko find that the rate of building in most Sun Belt cities has fallen by more than half over the past 25 years, in some cases by much more, even as demand to live in those places has surged. “When it comes to new housing production, the Sun Belt cities today are basically at the point that the big coastal cities were 20 years ago,” Gyourko told me. This explains why home prices in the Sun Belt, though still low compared with those in San Francisco and New York, have risen so sharply since the mid-2010s—a trend that accelerated during the pandemic, as the rise of remote work led to a large migration out of high-cost cities.
In a properly functioning housing market, the post-COVID surge in demand should have generated a massive building boom that would have cooled price growth. Instead, more than five years after the pandemic began, these places still aren’t building enough homes, and prices are still rising wildly.
As the issue of housing has become more salient in Democratic Party politics, some commentators have pointed to rising costs in the supposedly laissez-faire Sun Belt as proof that zoning laws and other regulations are not the culprit. “Blaming zoning for housing costs seems especially blinkered because different jurisdictions in the United States have very different approaches to land use regulations, and yet the housing crisis is a nationwide phenomenon,” the Vanderbilt University law professors Ganesh Sitaraman and Christopher Serkin write in a recent paper. Some argue that the wave of consolidation within the home-building industry following the 2008 financial crisis gave large developers the power to slow-walk development and keep prices high. Others say that the cost of construction has climbed so high over the past two decades that building no longer makes financial sense for developers.”
The article concludes:
“The forces opposed to new development are just as vehemently opposed to the kind of reforms needed to avert a future crisis. Many local and state governments across the Sun Belt have tried and failed to implement lasting pro-housing reforms. But the recent spike in home prices across the region has put even more pressure on lawmakers to act. The Texas legislature recently passed several pieces of legislation that will, among other things, reduce the minimum lot size of new homes, limit the power of the “tyrant’s veto,” and allow multifamily housing to be built on land currently zoned for offices and retail. Red states like to portray themselves as free from the pathologies that have made housing such a problem in other parts of the country. Now they have an opportunity to prove it.”
Interesting info. The entire article is worth a read.
Tony
This entry is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International license.
