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Is building our way out of the current housing crisis the answer?

housing market
Posted at 7:38 AM, Jun 08, 2022
and last updated 2022-06-08 13:27:19-04

DENVER — There seems to be new home construction on every corner of nearly every American city. However, those "for sale" signs, aren't indicative of the housing crisis we have on our hands.

"We have a housing shortage and therefore, with prices rising so fast, it means there is simply not enough inventory for the first time buyers," said Lawrence Yun, the Chief Economist with the National Association of Realtors.

Millennials and the Gen Z generations make up many of these first-time buyers, creating a gap in generational wealth.

I asked Christina Huber, a professor of economics at the Metropolitan State University of Denver if this shift means more people who are considered to have a middle income, will soon fall into that low-income category because they cannot afford to buy a home.

She points out that in our current society, home ownership equals wealth building.

"If this situation continues long term, I think it's really going to exacerbate the generational inequality we see already," Huber said.

In this country, your wealth status of the low, middle or upper class, has primarily been defined by income. But this current housing crisis is redefining that.

"We like to think we define ourselves by our incomes, right? But in many ways, I think we are more defined and more trapped by our wealth and assets," Huber said.

"But it doesn't necessarily solve the asset building, the wealth-building issue, because a lot of the low-income housing you qualify for, but you don't necessarily get to reap the equity games from it."

Many experts like Bryan Greene, the vice president of Policy and Advocacy with the National Association of Realtors, feel we can build our way out of this mess.

"Homeownership has been the bedrock for the American dream for so long, there is an expectation we can figure this out and carry on this legacy to future generations," Greene said. "We are way behind where we ought to be for the size of our population in terms of home construction. We're about 5.5 million units short according to our estimates."

However, Huber doesn't agree.

"So I don't necessarily see building more homes as something that's going to solve a lot of our problems. The builders also purposely don't build the starter homes and the cheaper homes and the cheaper apartments. They are building the luxury apartments and the luxury homes because they are making more money that way," Huber said.

Yun feels an influx of housing is needed, but they need to be affordable.

"So there has to be the affordable housing options and when we are looking at affordable housing options, these are people in the middle incomes, say, nurses, teachers, firefighters, people who are in the local community that should be rooted in the local community by being homeowners, but now they are getting priced out," Yun said.

The numbers tell us this story. As of April of 2022, the average sales price of a new home in the U.S. was about $570,000. The average household income is just under $88,000.

"Half of the homes in the country, you know, if we're looking nationwide require an income of $100,000 or more and when you look across the American population. A majority of the population could not afford a home," Greene said.

These experts say change on the policy levels is necessary but there are also moves that can be made on the ground in communities.

"We've been proposing some tax incentives that could perhaps help in the short term to get more housing inventory in the sales market, but then some tax credits that might allow for the conversion of some unused commercial spaces to be converted to residential properties," Greene said.

"Maybe reducing some of the zoning regulations so the builders can more actively and quickly bring about more units to the market," Yun said.

These experts all agree that it's going to take real change for buyers to feel it.