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More Housing Is Coming – But the National Shortage Will Persist

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More Housing Is Coming – But the National Shortage Will Persist
Carpenter
Concrete carpenter Omar Miranda works on new townhouses in North Salt Lake, Utah, one of the states struggling to get more housing built because most residents can’t afford existing homes.
Kristin Murphy The Deseret News via The Associated Press

Read more Stateline coverage of how communities across the country are trying to create more affordable housing.

Local officials across the country have approved more than a million construction permits for new single-family and multifamily housing this year. That’s up by nearly a third since 2019 and more than double the number from a decade ago, according to the U.S. Census Bureau.

Compared with the first seven months of 2019, Texas has issued 55,000 more permits, and Florida has issued 47,000 more this year. The number of permits issued is up by 17,000 in North Carolina, 14,000 in Arizona and more than 10,000 in California, where the state has tried to force municipalities to make it easier to construct new housing.

The number of permits issued declined only in Alaska, Hawaii, Illinois and the District of Columbia, a Stateline analysis shows.

Nevertheless, experts say it could take nearly a decade to erase the nation’s housing shortage, which has driven up home prices and rents, pricing out many lower- and middle-income families. A Freddie Mac report released last year said the nation was short some 3.8 million units in 2020, up from 2.5 million in 2018. Experts cite a slowdown in building after the housing bubble of the late 2000s, with starter homes particularly lacking.

Furthermore, labor shortages and supply-chain issues have lengthened the time between the issuance of permits and construction. And some local officials across the country have resisted state plans to increase housing.

“How many people are living with relatives or friends and can’t find a house? The safety net we have is generated by home ownership, and we’re losing that,” said Utah state Rep. Steve Waldrip, a Republican who sponsored a recent law that gives localities with more affordable housing an easier route to state transportation funding.

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New housing unit permits are increasing in most states as builders work to capitalize on high prices and shortages in popular areas, especially in the South where most of the increase has been. More than 1 million units were approved, though not necessarily built yet, in the first seven months of 2022, up 34% from the same time in 2019.

Source: U.S. Census Building Permits Survey, Stateline analysis.

Robert Dietz, chief economist for the National Association of Home Builders, questions Freddie Mac’s estimate of the nation’s housing shortfall, saying it’s closer to 1 million units. However, Dietz predicted that the deficit will grow this year, citing labor shortages and higher costs for building materials.

“When people say ‘X’ policy will help get more housing built, that means nothing if there isn’t anyone to build it,” Dietz said. He said construction is likely to start recovering next year, but he predicted it would take until at least 2030 to bring housing supply back into proportion with demand so prices can ease.

The housing gap is larger for single-family homes, which are more sensitive to high interest rates. By raising interest rates to tame inflation, the Federal Reserve likely will slam the brakes on construction of new single-family homes, said Nadia Evangelou, director of forecasting and senior economist for the National Association of Realtors. The association said the nation needs 5.5 million more single-family and multifamily units. Building that many would take a decade, even with accelerated construction.

States that have tried to promote the construction of more housing often are thwarted by local officials, who have the most say in what gets built and where, said Alexander Hermann, a senior research analyst at Harvard’s Joint Center for Housing Studies, which in a June report noted that record numbers of homes are currently under construction.

“Obviously, statewide initiatives have the potential for a much greater impact,” Hermann said.

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California has a new eight-year plan that sets a goal of 2.5 million new homes, including a million for low-income families, more than twice the number in the last plan. Local resistance has been fierce, however. A state audit in 2020 noted that some wealthy cities, such as Newport Beach, were assigned less than their fair share of affordable housing, just two units, compared with 1,100 for nearby and comparably sized Lake Forest. Democratic Attorney General Rob Bonta accused the town of Woodside of trying to evade new housing rules this year by declaring itself a mountain lion sanctuary.

California has stepped up efforts to enforce local compliance with laws requiring zoning for more housing, threatening fines or even court-supervised rezoning.

“Recalcitrant cities are getting blown away by court rulings and state enforcement,” said Stephen Levy, director of the Center for Continuing Study of the California Economy, a private economic research group based in Palo Alto.

Levy said the state’s last eight-year housing plan was “a disaster,” noting that some cities in Silicon Valley have only a small fraction of the low-income housing the state asked for by the end of 2022. Cupertino, for example, has approved permits for 19 units compared with a goal of 563 by the end of 2022, and Sunnyvale has 193 toward a goal of 2,555, Levy said.

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The housing shortage is so dire that even in Connecticut, known for local rules that require large lots for single family homes, state lawmakers are considering changes. On 81% of the land in Connecticut that is zoned for residential use, the governing municipality requires each new home to be on at least .92 of an acre. On 51% of the state’s land, the requirement is almost two acres, according to a 2021 Cornell University study.

A bill in Connecticut proposed last year, and revived in 2022, would create 10-year state housing plans, dividing up responsibility for producing affordable housing among regions of the state. The bill has yet to get out of committee despite support from state House Majority Leader Jason Rojas, a Democrat.

Rojas said he will try to bring the bill back next year, saying it’s based on similar plans in both California and New Jersey.

“We’re going to have to split the baby and make it not so much a top-down mandate, which doesn’t fly in a place like Connecticut, which has an affinity for local control,” Rojas said.

The idea faces local opposition.

It would be “very devastating for communities throughout Connecticut” and “force an arbitrary allocation of affordable housing units to every municipality,” wrote Alexis Harrison, a Fairfield Town Planning and Zoning Commission member, in an editorial.

Waldrip, the Utah state legislator, said localities have raised similar complaints in his state. But, he said, “It’s a serious enough situation that even a Republican, free-market state needs to take it very seriously.”

By one measure, Utah has the fastest housing growth in the country, approving 34.5 new units per 1,000 existing units last year, according to calculations provided by Hermann of the Joint Center for Housing Studies. Even so, prices have risen beyond the means of most Utahns.

“I couldn’t believe it when the median home price hit $600,000 for Salt Lake City. I thought I’d never see it,” said Dejan Eskic, a housing expert at the University of Utah’s Kem C. Gardner Policy Institute. He said 71% of families in the state can no longer buy the median-priced home in their area, despite a record 40,144 homes approved last year.

As in many states, Utah experts could see the price problems coming 10 years ago, when the population started booming but homebuilding was still on hold after the housing bubble burst in the last 2000s.

“We were permitting less than 10,000 homes but population growth didn’t stop, and we said, ‘Uh-oh, prices are about to take off,’” Eskic said. 

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