The expensive real estate in America’s major coastal cities is a result of zoning regulations and a lack of housing supply. According to recent research, these issues are now increasingly plaguing once cheap towns and cities across the United States.
According to a recent report by housing policy group Up For Growth, there was a severe undersupply of dwellings in more than half of the country’s metropolitan areas in 2019, a significant rise from one-third of cities in 2012. According to Up for Growth, the country needs 3.8 million more dwellings to satisfy its housing demands, which is an increase from 2012.
However, the scarcity of housing is becoming a problem in places all around the United States, not only in major coastal cities like San Francisco and New York. Home prices have increased as a consequence, especially in smaller cities, aggravating inequality as a result of the exclusion of many people of color, young adults, and low-income employees from the dream of homeownership due to high housing costs.
If a large portion of Americans are prevented from purchasing homes, which is seen to be one of the main ways to accumulate wealth over time, it might have long-term effects.
According to Mike Kingsella, CEO of Up for Growth, which focuses on alleviating the housing shortage, “clearly, affordability is at a crisis point for millions of Americans throughout the country.” Homeownership is becoming increasingly out of reach in areas where there is underproduction.
Up for Growth discovered in its examination of Census data that 83 cities that had enough housing as of 2012 by 2019 had an undersupply of dwellings as part of that escalating deficit.
Large metro regions like the Phoenix-Mesa-Chandler region and smaller communities like Merced, California, and Bend, Oregon are among the places that are now housing-scarce.
Of course, the research covers a time before the pandemic’s disproportionate influence on the housing market, when work-from-home rules let residents of costly cities to move to less expensive areas. The median house sales price hit a record high of $416,000 in June as a result of rising housing demand, a worsening housing scarcity, and low loan rates.
In addition, Kingsella said that recent interest rate increases by the Federal Reserve are making it more costly to both buy and build homes, which might exacerbate the issue of an undersupply. It’s difficult to think that things could improve.
He did point out that some of the problems may be resolved by changes in policy, such as zoning reform legislation that permits additional dwelling units and denser construction.
Where housing is in short supply
The 83 metropolitan areas in the U.S. that went from having a sufficient supply of housing to a shortage are dispersed all throughout the country. Numerous them are less prosperous communities that lack the thriving financial, technology, and other key businesses present in America’s largest urban centers.
Consider the little city of Merced in central California, which is renowned for its agriculture and serves as a base for exploring Yosemite National Park. According to Zillow, the town’s property values were wiped out by the 2008 housing crash, dropping 31% of their worth in only one year, making it the second worst-performing real estate market that year after Stockton, California.
The lack of homes for people who desire them has caused another crisis in Merced’s housing market since 2012. 8.7% of the city’s total housing stock, or a deficit of dwellings, existed in 2019. According to the research, that is even worse than Los Angeles’ housing undersupply, which was 8.4% that same year.
Due to a lack of housing options, Merced’s housing market has seen price increases. According to Up For Growth, the median property value in Merced was $282,900 in 2019, more than double what it was at that time. In contrast, over the same time period, the median house value increased by roughly 40% across all 310 metropolitan areas in the country.
Rust Belt communities like Appleton, Racine, and Green Bay in Wisconsin are examples of those that went from having adequate homes to having a housing crisis. According to the data, there is a 5% undersupply in each of the three metro areas. The tendency has also affected certain Southeast cities, such as the Atlanta region, Richmond, Virginia, and Hilton Head Island-Bluffton, South Carolina.
“California doesn’t have a monopoly on exclusionary housing,” Kingsella noted. “We’re seeing the Southeast particularly falling deeper and deeper into a housing deficit, and at a rate that’s much more rapid than places like California.”
“We have a problem”
According to Peggy Bailey, vice president for housing policy at the think tank Center for Budget and Policy Priorities, who spoke on Thursday at a Senate hearing on the status of housing in America, the present housing market is particularly difficult for low-income Americans.
Due in part to constraints on developers from growing prices for land, materials, and labor — all expenditures that have drastically increased during the epidemic — new residences are now frequently geared at middle- and higher-income consumers. According to Pew Stateline, this is making low-income and affordable housing developments costly for developers.
“We have partly been in a development boom over the last 18 months,” but the typical rents for those properties are about $1,700 to $1,800 a month, Bailey said at the hearing. “The median renter can only afford about $1,000 month.”
According to Democratic Senator Jon Tester of Montana, the economy is being harmed by housing shortages and affordability difficulties.
“We have a problem,” he said. “It is having some major impacts on economic growth in small towns because there’s no place for the workforce to live, no place for entrepreneurs to live.”
Widening wealth inequality
One solution to the housing scarcity situation, according to Kingsella, is to change zoning regulations and promote funding for more affordable homes. For instance, the Up for Growth report highlighted those places lacking enough housing but with access to employment opportunities and robust infrastructure may sustain up to 40% more housing density.
“It means supporting more homes and [Accessory Dwelling Units] and duplexes and triplexes and showing up at city council meetings and saying yes to more housing,” he said.
Without expanding the nation’s housing supply, in short, the market’s dynamics aren’t likely to change. A continued shortage will benefit existing homeowners, without helping those with lower rates of homeownership, such as Black Americans, experts say.
“If we are raising demand but not increasing supply, most of the benefits would go to current owners, who tend to be White Americans,” noted Lawrence Yun, chief economist at the National Association of Realtors, at the Senate hearing.
Although it may seem wonderful for present homeowners to watch their Zillow “Zestimate” increase each year, Kingsella pointed out that growing property prices unrelated to an equivalent rise in household wages are causing wealth inequality to expand.
According to Kingsella, present homeowners are increasing their wealth more quickly than non-homeowners since home values are rising considerably more quickly than salaries. Housing expenses in particular, he continued, “are driving income and wealth disparity.”
— With reporting from Irina Ivanova