Shortage of affordable housing in the US

[Ken]

#1, higher end housing is getting built, but more $700,000 or $1.3mn homes doesn't do anything to help the average person get a house.

This is a common fallacy.

Builders do tend to build more expensive homes because there is more profit in it. And in many areas there are zoning restrictions such as minimum lot sizes, setbacks, minimum square foot requirements and so for that prevent them from building more economical forms of housing such as blocks of modest row houses. So if you are a builder and you have a 5 acre subdivision with minimum lot sizes of 1/4 acre in the zoning code then you can only build 20 homes maximum. The only way to earn more money on that subdivision is to build bigger homes on each lot.

But think about it for a minute. If are living in a community where there is demand for $1 million homes and none are getting built, then those people who have $1 million to spend and want housing will still buy homes. They will just buy $700,000 homes and spend the extra cash on remodeling or improvements. And then those for whom the $700,000 homes were a stretch who got outbid by the $1 million buyers will just be forced to drop down and buy homes in the $500,000 price range instead, and out-bid buyers in that price point. And the buyers who might previously have bought the $500,000 homes are now shopping homes that were previously $400,000. Rinse and repeat. Housing markets in any given location are interconnected.

Restricting construction at the high end of the market doesn't make those buyers go away. It just means they start shopping further down the price scale where they will have the means to outbid anyone shopping for more modest homes.

[Ken]

Ken, this seems to contradict what you say about not having enough more expensive homes.

https://www.lendingtree.com/home/mortga ... tes-study/

Towns with higher vacancy rates tend to have more expensive homes than those with lower vacancy rates. Median home values in the 10 towns with the highest vacancy rates are an average of $177,190 more expensive than median home values in the 10 towns with the lowest vacancy rates. While exceptions exist, the main reason for this likely stems from how buyers are often willing to spend top dollar on vacation homes they don’t live in year-round.

Not really. If you look at the report they are talking about high-end vacation destinations like Aspen, Breckenridge, Martha's Vineyard where there are both (1) highly restrictive zoning preventing new construction, and (2) super high demand for vacation homes for the wealthy.

So in a town like Martha's Vineyard it is mostly multi-million beach mansions that are vacation homes for rich Bostonians. They are vacant in the sense that they are not occupied most of the year but they are not vacant in the sense that they are on the rental or purchase market.

Pretty much every exclusive beach or resort town location is the same: San Juan Islands, WA, Carmel CA, Kailua-Kona HI, Jackson Hole WY. Highly restrictive zoning and lots of vacation homes owned by the very wealthy.

But those same features are not present in ordinary cities like Cincinnati, Charlotte, Indianapolis, Omaha, Portland where markets operate more normally.

[ohio jones]

Where I live, someone could build literally anything: a high rise, duplexes, triplexes, trailers. The only restrictions are that very large projects would have environmental impacts that would need to be mitigated.

Duplexes, triplexes, trailers, yes. But a high rise would be governed by the Ohio Building Code rather than the Residential Code of Ohio, and that is enforced statewide, either by a local building department or directly by the state.

[RZehr]

There is a house building company, Adair Homes, here that caters to the lowest income, entry level, new homes. Very, very, plain homes in terms of both quality and design. The cheapest windows, roofing, siding, cabinets, etc. It is all built to code and inspected. Structurally they are good. They offer a partnership build, not just a turn key house. By that, I mean that the home owner has to do all the excavation, and site work. And stuff like painting and maybe some flooring. Decks and sidewalks are not included, the homeowner needs to get that done.

This company is very large. The smallest house they offer is 597 sq feet 1 bed/1 bath, for $213,999. The smallest 3 bed/2 bath, 1,192 sq ft house, is $284,999. Land and site work, and utilities, are not included in these numbers.

[Ken]

There is a house building company, Adair Homes, here that caters to the lowest income, entry level, new homes. Very, very, plain homes in terms of both quality and design. The cheapest windows, roofing, siding, cabinets, etc. It is all built to code and inspected. Structurally they are good. They offer a partnership build, not just a turn key house. By that, I mean that the home owner has to do all the excavation, and site work. And stuff like painting and maybe some flooring. Decks and sidewalks are not included, the homeowner needs to get that done.

This company is very large. The smallest house they offer is 597 sq feet 1 bed/1 bath, for $213,999. The smallest 3 bed/2 bath, 1,192 sq ft house, is $284,999. Land and site work, and utilities, are not included in these numbers.

At that price point and size, I would think that manufactured homes just dropped into the site would be the most economical option. 600 sf is smaller than the typical single wide. I actually think trailer parks are something we should see more of as housing option in this day and age. Some are quite nice.

[mike]

and then there is the issue of all sizes of homes being converted to short term rental vacation homes.

I own a short-term rental apartment. I like the option of staying in a rental home or apartment myself when traveling; it's often a much better choice for a family over renting multiple hotel rooms. It's a profitable side business for many people. And it is an in-demand service. We frequently get booked during the week by out of town folks working in the area, and on weekends by vacationers or folks visiting family. My wife enjoys keeping the place attractive for guests, and the person who cleans it for us makes an income from it as well.

That's nice for you as part of the capitalist class that is able to acquire capital (no doubt using existing capital to secure loans to buy more capital, or make improvements on that), and then employ the labouring class to do the actual work (like cleaning).

It is, however, a disaster for everyone else, because the net effect of this is that there is less inexpensive housing on the market, and anything that does appear becomes attractive to "investors". Of course, the only way to deal with this is regulation - such as zoning that requires hotels to be, well, zoned as hotels, and placed in areas with other hotels and commercial services, instead of plopped in the middle of residential areas.

Inside Mennonite circles, AirBnB has been a disaster. Instead of the old way where people opened their homes for guests, it is quite common now to simply be told that so-and-so has a home on AirBnB and just go book it on AirBnB. You never even see or get to know the host. It seems quite sad to me when God's people replace the gift of hospitality with the engaging in transactions on AirBnB.

I don't really know how or whether to respond. I'm tempted to call all of that just ignorance, but then again, you may have no way of knowing. The few hours that it takes to clean an apartment are next to nothing compared to the hours of manual labor it takes to build and maintain a rental property. We do plenty of the cleaning ourselves, because our cleaner only cleans when it suits her schedule, which is made up of cleaning various short term rentals in the area, a job for which she makes significantly more than many other hourly jobs. Of course it takes capital, but don't act like a capitalist is a person who sits in an office or easy chair making everybody else do the work. And to call a person who runs an AirBnb inhospitable is like saying that the owner of a hotel is inhospitable because he never gets to see or know his guests. People who rent short-term have no interest in getting to know the owner. It has nothing to do with an owner's hospitality. One of the other things we like about having the apartment is the ability to rent it for free or reduced cost to friends, or friends of friends, or to teachers or other people we know who only need it for a short specific time. Additionally, ours is only one of about 60-70 AirBnbs in our immediate area. And the existence of short term rentals has exactly zero impact on whether we open our home for guests.

[Josh]

Where I live, someone could build literally anything: a high rise, duplexes, triplexes, trailers. The only restrictions are that very large projects would have environmental impacts that would need to be mitigated.

Duplexes, triplexes, trailers, yes. But a high rise would be governed by the Ohio Building Code rather than the Residential Code of Ohio, and that is enforced statewide, either by a local building department or directly by the state.

That's true. However, there is no zoning preventing such a project, or rules about things like setbacks, which is the case that Ken keeps making.

Despite me living in a paradise of no rules about setbacks, minimum lot sizes, and so on, housing is still expensive and it still costs $200 a square foot to build.

[Josh]

There is a house building company, Adair Homes, here that caters to the lowest income, entry level, new homes. Very, very, plain homes in terms of both quality and design. The cheapest windows, roofing, siding, cabinets, etc. It is all built to code and inspected. Structurally they are good. They offer a partnership build, not just a turn key house. By that, I mean that the home owner has to do all the excavation, and site work. And stuff like painting and maybe some flooring. Decks and sidewalks are not included, the homeowner needs to get that done.

This company is very large. The smallest house they offer is 597 sq feet 1 bed/1 bath, for $213,999. The smallest 3 bed/2 bath, 1,192 sq ft house, is $284,999. Land and site work, and utilities, are not included in these numbers.

At that price point and size, I would think that manufactured homes just dropped into the site would be the most economical option. 600 sf is smaller than the typical single wide.

A 2,000 sq ft trailer costs $300k, plus the cost of site prep, utilities, driveway, delivery, and so on.

Used single wides (typically 800 sq ft) that are 10 or so years old go for sale for around $30k where I live. Double wide that's closer to 2000 sq ft? Try $100k (based on a recent auction).

I actually think trailer parks are something we should see more of as housing option in this day and age. Some are quite nice.

Well, where I live there are no restrictions on putting in more trailer parks (other than those pesky sewage laws, which end up significantly driving up the cost of a new trailer park - basically, a trailer park that wants to have 50+ sites, which is what is needed to be economical, will need to build its own sewage plant, or contract with the nearest city and build sewer lines to it.)

Yet trailer parks are in decline. They aren't desirable and a lot of people don't want to live in them. And it's a moot point, anyway, since new trailers are very expensive. It's difficult to get financing on a used trailer.

[Josh]

I don't really know how or whether to respond. I'm tempted to call all of that just ignorance, but then again, you may have no way of knowing. The few hours that it takes to clean an apartment are next to nothing compared to the hours of manual labor it takes to build and maintain a rental property. We do plenty of the cleaning ourselves, because our cleaner only cleans when it suits her schedule, which is made up of cleaning various short term rentals in the area, a job for which she makes significantly more than many other hourly jobs. Of course it takes capital, but don't act like a capitalist is a person who sits in an office or easy chair making everybody else do the work. And to call a person who runs an AirBnb inhospitable is like saying that the owner of a hotel is inhospitable because he never gets to see or know his guests. People who rent short-term have no interest in getting to know the owner. It has nothing to do with an owner's hospitality. One of the other things we like about having the apartment is the ability to rent it for free or reduced cost to friends, or friends of friends, or to teachers or other people we know who only need it for a short specific time. Additionally, ours is only one of about 60-70 AirBnbs in our immediate area. And the existence of short term rentals has exactly zero impact on whether we open our home for guests.

I simply observed that since AirBNB became popular, AirBNBs are substituting for Mennonites extending hospitality to one another on routine business trips, funerals, weddings, and so on. I think this is an extremely negative trend, but hey, if you think wealthy people renting out rooms for $200 a night is a good thing, then go right ahead.

[Ken]

Where I live, someone could build literally anything: a high rise, duplexes, triplexes, trailers. The only restrictions are that very large projects would have environmental impacts that would need to be mitigated.

Duplexes, triplexes, trailers, yes. But a high rise would be governed by the Ohio Building Code rather than the Residential Code of Ohio, and that is enforced statewide, either by a local building department or directly by the state.

That's true. However, there is no zoning preventing such a project, or rules about things like setbacks, which is the case that Ken keeps making.

Despite me living in a paradise of no rules about setbacks, minimum lot sizes, and so on, housing is still expensive and it still costs $200 a square foot to build.

Just because rural Ohio has lax zoning doesn't mean it is the same in the rest of the country.

In fact, I would suggest that most if not all of the metro areas that are in the top 50% for housing costs have a myriad of restrictive zoning requirements that make housing more expensive and make many forms of lower income housing illegal to build. In fact, the exceptions like Houston are pretty unusual. And even Houston has the same thing as zoning in that most of the residential parts of the city are governed by HOAs that have more restrictive requirements than many zoning codes.