THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

Expedited permitting processes should be a major facet of regulatory reform at the municipal level.

With faster approval times, developers could produce housing more consistently, which has the potential to lower construction costs and allow for lower housing costs over time.

The use of accessory dwelling units (ADUs) is not new but provides a relatively immediate way to relieve pressure on the housing market in a region. 

These units provide a benefit for municipalities in that they can increase density, often without the need for major zoning changes and with a more limited amount of construction activity in residential areas.

THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

Up-zoning and rezoning policies involve converting low-density, or commercial parcels, to higher density housing lots.

Broadly, these policies should focus more specifically on underlying zoning regulations that can be modified to support the development of new housing over time.

Municipalities and public agencies should assess their landholdings to identify underutilized land or find vacant or blighted lots and rezone these lots for housing, especially in areas in which increased housing would benefit nearby businesses and residents.

THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

The Rosen Group report “State and Local Policy Strategies to Advance Housing Affordability” highlights policy pathways that communities should consider pursuing in order to support local affordability, such as:

Inclusionary zoning is a direct approach, by which localities or states can require developments to include affordable housing, often in areas where it is undersupplied or would provide a large public good.

It is important for inclusionary housing policies to align with local market conditions to ensure that these policies remain economically and socially viable and do not turn into a barrier to development.

THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

Arthur C. Nelson, professor of planning & real estate development at the University of Arizona, said there are houses “with more rooms than people because over the years, the average number of people in a home has shrunk from 3.5 to 2.5.” 

These are the aging baby boomers’ houses on large lots that will not match the needs of young buyers.

Nelson believes in many regions, including the Great Lakes, there will be more senior citizens trying to unload their homes than people who want that type of housing on large lots.

This will become very evident by 2030,” he said. 

“Seniors, whose biggest asset is the home they own, will sell their home for much less than they hoped — or not be able to sell at all. 

Public policy must address this mismatch of housing needs.”

THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

Arthur C. Nelson, professor of planning & real estate development at the University of Arizona, said a trend linked to the pandemic is that new homebuyers want more out of their communities — such as walkability, convenient transit and places for social interaction.

He said many suburbs have done a good job of putting in sidewalks and creating complete streets, so they are competitive with urban areas. 

This means people can stay in the same metro area, but trade a smaller expensive attached unit in the center for more room at a lower cost on the fringe of the core city.

Nelson said despite the desire to age-in-place, many baby boomers will want to unload large houses that they can no longer maintain — to become renters in smaller, more efficient units.

THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

“Many suburbs were poised to meet that demand. 

I think a part of that sudden demand for homebuying by millennials was, in part, a failure for cities to expand housing supply for young families. 

They did a good job of attracting young singles, young couples — but cities missed the opportunity to build the missing middle,” Arthur C. Nelson, professor of planning & real estate development at the University of Arizona, continued. 

“Cities need to do more to make their current housing stock nimbler.”

THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

Arthur C. Nelson, professor of planning & real estate development at the University of Arizona, focuses on long-term demographic trends. 

He said the big rush to buy houses soon after the pandemic hit hard was a surprise to many.

“The younger generations were accumulating some money (because) the pandemic shut things down so there was nothing to spend money on and with two percent interest rates — the market came together nicely for millennials and they moved to the suburbs,” he said.

THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

Multiple surveys show roughly half the nation would opt to move to a walkable community — where they could walk to most of their daily needs — even if it meant they would live in an attached dwelling such as a townhouse, condo or apartment.

However, the impact of the pandemic plus trends towards millennials starting families and settling down as they age, indicate a shift in the opposite direction for some. 

Results from NAR’s Coronavirus Update to the 2020 Community and Transportation Preferences Survey show younger respondents — especially those with children at home — reported a reduced need to be near highways and public transit or to have a home with a short commute to work. 

Results, released after surveying at the height of COVID in 2020, indicated an increased desire for more outdoor space and larger homes, most particularly among millennials and those with kids at home.

THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

AHS advocates for housing types that support transit-centered, walkable communities that are inclusive and equitable for people of all incomes, backgrounds, ages and stages of life.

The group is well-aware that when people hear about zoning changes, they worry how it will impact their homes, neighborhoods and environment.

“Updating zoning laws allows for more types of housing and does not mean an end to single-family zoning or allowing large apartment buildings next to single-family homes,” Alice Hogan, a consultant to AHS,  said.

“AHS advocates for mindful growth so that added density — or gentle density can be easily incorporated into the fabric of a community. 

Missing middle housing is well-suited to fit into existing neighborhoods because it is efficiently sized and designed with a lower perceived density.”

THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

Though missing middle housing isn’t the solution to all affordability challenges, AHS sees it as a way to re-introduce more housing types into the local housing market.

“Zoning laws that were enacted many decades ago in Arlington — and in many other places across the United States — can make it a challenge to build missing middle housing today. 

But we’re starting to see a shift: cities like Berkeley, Calif., have committed to ending restrictive zoning laws by the end of 2022. 

And in August 2020, the city of Portland, Ore., approved a policy legalizing up to four homes on most lots and significantly reduced maximum building sizes,” Alice Hogan, a consultant to AHS, said. 

“In Arlington, AHS is pleased that the county is exploring zoning changes to allow for more missing middle housing types through a multi-year study.”

THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

Alice Hogan, a consultant to AHS, said missing middle housing is an important tool for communities to have in their toolbox when seeking to increase housing supply and create greater housing diversity and opportunity.

“When it comes to the issue of affordability, we like to think of missing middle as attainable housing instead of affordable housing, which is restricted to people making a certain percentage of the area median income.

Missing middle housing is ‘affordable-by-design,’ meaning it is priced at a financial level that many middle-income earners can achieve, including young professionals, essential workers, and seniors,” she said.

THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

“They are designing attractive housing for lower incomes. 

I lived in workforce townhomes and you couldn’t tell it from the outside. 

They have built public housing next to million-dollar townhomes and it hasn’t made them less desirable,” said Lisa Sturtevant, chief economist for Virginia REALTORS®.

Sturtevant has hope for new building methods that can create more affordable housing that is accessible to all in terms of price and mobility accessibility. 

She points to a demonstration house created via 3D printer. 

She noted advances in modular housing produce a more durable, flexible and sustainable product — not the modular housing that people picture from 1970s trailer home styles.

Sturtevant endorses efforts by advocates such as the Alliance for Housing Solutions (AHS), a nonprofit working to increase the supply of affordable housing in Arlington County and Northern Virginia.

THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

Lisa Sturtevant, chief economist for Virginia REALTORS®, agrees that swift action must be taken at all levels of government to supply more housing — especially the missing middle.

“Where housing is most needed is where the strongest community opposition is. 

And elected officials put their foot down on housing,” she said.

“Arlington is joining Minneapolis in moving to allow duplexes and triplexes by right in single-family zoning.

But sometimes the most progressive places are where road blocks come up in the way of housing for different populations.”

Sturtevant said NIMBYism must be resolved in the suburbs. 

She said people feel it will hurt their property values, but that isn’t an automatic.

THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

At the local level, the NAR/Rosen report urges incentivizing shifts in local zoning and regulatory environments to substantially increase the quantity and density of developable residential space.

“Housing policy is very complicated.

We haven’t had much policy at the federal level. 

I’m confident that this administration will see this is a major issue, that housing policy should be a center focus,” said Ken Rosen, chairman of real estate market research firm Rosen Consulting.

THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

The NAR/Rosen report explains that hurrying for solutions to the housing shortage will not only benefit families, but it also will create sustained fiscal success at all levels of government.

“This additional new residential construction would also be expected to generate more than $53 billion dollars in new annual tax revenue, including $18 billion in state and local taxes and $35 billion in federal taxes, reflecting a wide range of activity, including considerable new federal income taxes related to the new job creation,” the report states.

THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

Ken Rosen, chairman of real estate market research firm Rosen Consulting, said cities and regions would be wise to use a good portion of their share of previous stimulus bill funding for government, plus the $1.2-trillion infrastructure funding, to improve diverse housing and transit opportunities where people live and work.

“Address congestion with efficient transit. 

Allow more density near transit. 

Relax costly parking requirements for residential next to transit,” he said. 

Density can work well. 

People want more open space and concentrating density can create a balance that allows open space.

THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

“The expensive areas — and that has increased from a few big cities a few decades ago to dozens of metros — must create more housing and different prices. 

We must convert underused commercial to residential. 

We must allow more dense housing. 

We need special programs to support affordable housing,” Ken Rosen, chairman of real estate market research firm Rosen Consulting, said.

The NAR report that Rosen led bluntly states:

“Large-scale investment in infrastructure for the 21st century provides a once-in-a-generation opportunity to avoid the mistakes of the past and instead build infrastructure and housing together in a way that plans for inclusive and sustainable growth that binds communities together instead of dividing them along racial lines.”

THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

“Housing is very hard to put in place in a number of areas. 

The NIMBY phenomenon has really taken hold in California and many other metro areas.

You think it’s protecting your area, your value — but it’s denying housing to the next generation. 

It makes it increasingly difficult for working people, even middle-income earners to buy any kind of housing,” said Ken Rosen, chairman of real estate market research firm Rosen Consulting.

Rosen said real earnings are a lot higher in secondary cities. 

He said a family may spend 25 percent of its income on housing in a smaller market, but more than 40 percent of it on housing in a major city.

THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

“In a lot of metro areas, the supply of new housing is constrained by very tough local zoning requirements,” said Ken Rosen, chairman of real estate market research firm Rosen Consulting.

“When it is harder to build things, it becomes more costly. 

The affordability gap widens.”

Rosen said low interest rates and stimulus checks in 2020 fueled a strong desire for homeownership, but noted that it is increasingly difficult to supply housing to meet the demand.

THE HOUSING CRUNCH IS REAL

HOW WE GOT HERE, HOW WE ADDRESS IT AND THE DEMOGRAPHIC SHIFTS THAT WILL IMPACT WHAT AND WHERE WE CALL HOME

Ken Rosen, chairman of real estate market research firm Rosen Consulting, was the lead author of the NAR “Housing is Critical Infrastructure” report.

Rosen also is seeing people leave high-cost, high-tax markets for lower cost areas, though the cost of living in a particular area is more than just the house. 

It also involves the cost of transportation. 

Houses in rural locations may cost less but you need a car for each licensed driver. 

Yet, he sees a shift from large population coastal areas (east and west) to Sun Belt and Mountain States. 

He noted that San Francisco lost 10 percent of its population between March and November 2020.