An imbalance as dramatic as the pandemic-era housing market is almost always going to have complex causes and a long history. Despite this, many people continue to view the pandemic as the primary driver of the current affordability, equity and supply issues that are making headlines and driving policy conversations at both the national and local level.
But as the crisis deepens, it is becoming more obvious that there were fundamental problems in housing before Covid’s disruptions. Parsing out the specific issues that preceded—and will continue past—the pandemic is increasingly urgent as policymakers seek to guide the market away from a recession or crash.
It is this work that researchers and advocates at housing think tank Up for Growth have attempted with a recent landmark study, tracing most of the biggest housing issues to a single trend—underproduction. According to their analysis, 47 states (and Washington D.C.) did not produce enough housing over the last decade, including 230 metro areas, for a total nationwide deficit of 3.79 million units.
“Ensuring we build enough housing that is affordable to all Americans won’t be easy. But there is growing data that the housing shortage is too great to ignore, and the problem is only growing,” the researchers wrote.
This is hardly revelatory by itself. Other recent studies by Freddie Mac and the National Association of REALTORS® (NAR) have offered similar top-line estimates of the crisis, ranging from around 1.8 million to as much as 6.8 million. But the Up for Growth analysis—which was supported by big industry players including NAR, Zillow and Holland Partner Group—sought to go further, pinpointing exactly how much individual markets are suffering in addition to the specific, localized causes for their lack of housing, as well as presenting what researchers described as a new approach to solving the crisis.
“A more-of-the-same approach to housing policy will not only fail to narrow the gap between the housing we have and the housing we need, it will also worsen the social, economic and climate problems that threaten our nation today,” they wrote.
At the highest level, Up for Growth’s plan—dubbed “A Better Foundation”—would seek to significantly change the areas where housing is built, make it significantly more sustainable and accessible, and focus on efficiencies with land in “high opportunity” areas. This includes a huge emphasis on gradually transforming existing communities to have more diverse, affordable housing.
But what does this look like for those in real estate in these individual markets? Do people at the ground level in these regions see the same issues? Or do the solutions they suggest make sense to someone who deals with housing in these areas every day?
Nikki Beauchamp is an associate broker at Engel & Vӧlkers, working in New York City, which, before the pandemic, underproduced by 342,144 units, or 4.4% of its total housing stock, according to Up for Growth (those numbers are likely bigger today). She says some issues are only just being acknowledged and discussed, as the problems with zoning, suburban sprawl and racial inequities are laid bare.
“There’s got to be a way to piece together that puzzle,” she says. “Not that everyone is going to be unhappy in one way, shape or form, but it’s almost like, you can’t please everyone…I think there is a bigger divide in this pandemic world that we’re in.”
The report highlighted New York City’s walkability—the most walkable city in the country by some measures. But only 2.5% of the larger metro area qualifies as walkable, and apartments in these areas are 236% more expensive than a comparable “drivable suburban rental.”
This is a result of what Up for Growth calls a false dichotomy between “expensive versus expansive” growth, where new housing in desirable urban cores or suburbs is out of reach to all but the very rich, and anything affordable is built hours away from jobs and amenities. As a solution, they suggest identifying areas with lower density and building a high proportion of denser, more affordable “missing middle” housing that serves moderate income families.
But most of those neighborhoods are the kind that have long been exclusionary, insular and segregated. Beauchamp says she is not optimistic that in New York City at least, radically changing the housing stock in these types of areas will happen anytime soon.
“I think it’s really, really hard to accomplish that,” she says. “You have people who will lobby against it—they don’t want to see that change occur. You can argue that there are political motivations. And you also have inherent, either direct or implicit, fair housing implications.”
Another very different community about 2,000 miles south and west of New York was also identified in the study for its severe and long-running issues with underproduction of housing. Laredo, Texas, sitting right on the U.S./Mexico border and boasting a population of nearly 260,000, had a deficit of 8,373 housing units in 2019—equivalent to 9.9% of its housing stock.
Laredo’s small MLS only includes about 700 agents, according to Leo Saenz, broker/owner of a Better Homes & Gardens franchise and longtime Laredo resident.
“We have about 209 pendings,” he explains. “So only like 400 agents are going to get checks in the next two months.”
Saenz says that for many years, a handful of developers have controlled much of the buildable land in the area, and as the city has grown (increasing its population by more than 20,000 over the last decade, according to the U.S. Census Bureau), housing has not gone up to match it.
“We’re not getting as many houses on the market to take care of everybody,” Saenz says.
Texas, as a state, is one of the top three worst for housing underproduction, according to the Up for Growth analysis, along with consistent population growth—particularly with Latinos, who make up about 95% of Laredo’s population.
Saez used to build houses himself in the area before getting into real estate, he says. The big landowners in Laredo are “really, really particular” about who they allow to build houses, according to Saenz, and they essentially decide when and where homes are built—more recently focused on more expensive houses on smaller lots.
Developers are nearly always looking to maximize their profits with land, which often translates to more expensive housing, according to the Up for Growth study. Explicitly incentivizing entry-level housing is one way to begin rebalancing the current housing environment.
Saenz says that from a purely real estate perspective, scarcity is creating a pattern of negativity and turnover in the area, with agents finding it hard to stay motivated.
“They start losing focus on their primary job, and there’s no growth,” he says. “I recruited this year, maybe 22 agents, and inactive licenses within a year was maybe five.
“I try to motivate everybody,” he adds, “but at the end of the day, they see that they’re losing a lot of time and putting in a lot of effort trying to make this business work.”
History and Change
Not everyone is seeing these issues the same way. An employee at Berkshire Hathaway HomeServices (BHHS) Georgia Properties in Gainesville, Georgia (who declined to provide her name), says that from her experience, housing production has been humming right along.
“Back when we were having a strong boom , there was a chance that you had to wait several months in order for you to get your house finished,” she says. “Things have slowed down just a little, but new construction is still booming.”
Gainesville was identified by Up for Growth as having the worst housing underproduction per capita, with a deficit equal to 11.5% of its total housing stock. Why this seemingly extreme underproduction hasn’t shown up qualitatively is not clear, as Gainesville has also seen significant population growth over the past decade.
The BHHS employee admitted that housing at certain price points and locations is becoming more difficult to find, with buyers widening the areas they search to find something affordable. The past three years have seen a significant increase in building, she said, which could potentially have narrowed that gap.
Whether there is truly a national solution to underproduction—at least in the short term—is still a difficult question. Up for Growth, while still trying to offer a framework that could work for housing across the country, acknowledged that every market is defined by local, unique factors and history.
“In Detroit, underproduction is driven by uninhabitable units,” the researchers wrote, “while in Sacramento, a lack of housing is driving the shortage. In Washington, D.C., underproduction is fueled by a lack of household formation.”
Beauchamp, who is Black, describes experiencing something that is unarguably a factor in every housing market in the country, when she noticed how different family members saw different outcomes based on where they lived in Long Island.
“I remember my uncle…this particular uncle was able to buy in this particular town,” Beauchamp describes. “The difference between the value in their house and the value of the houses of some of my cousins’ other friends, who were just on the other side of the town—sort of the White versus the Black side of the town, basically—just the difference between what my aunt and my uncle were able to do, and help their kids with, versus the same family, two kids just in the other side of town…literally the same structure on the other side of a line, one property can be worth twice as much.”
Redlining, racial covenants, appraisal bias and racial steering by real estate agents (something that was graphically exposed by a landmark 2019 investigation on Long Island) have all contributed to racial inequalities in housing, with huge gaps in homeownership, home values and lending between White families and families of color.
Up for Growth does not offer direct, specific solutions to address this, only arguing that future policies need to explicitly account for each region’s individual racist history (and current racist environment) when looking to create more housing.
Some communities are starting to take explicit steps in this direction. In Los Angeles, California, a stretch of waterfront property valued at $20 million was returned to the descendants of a Black family, the Bruces, who were robbed of the land by city officials in the 1920s.
Beauchamp says she hasn’t heard of anything to that level in her region, but that she is encouraged that conversations are starting up around those topics.
“I’m fascinated by people like Don Peebles, things people are actually trying to do to create equity and create more opportunity for maybe developers who are descendants, or of that background,” she says. “It feels qualitatively that there is more opportunity and more possibility, and I don’t know if that is just because the conversations are actually happening more in the open.”
Whether it is through these and other racial equity changes, densification or redefining growth direction, the Up for Growth researchers make a holistic argument for changing housing policies: It improves society for everyone. They claim that filling that 3.8 million housing deficit using their methodology will increase GDP by $209 billion more than if the country built the way it has in the past. And less commuting, easier and more equal access to jobs and amenities, more efficient transportation and sustainable, cheaper energy usage could become part of the necessary, ongoing project of bringing the country’s housing stock up to meet people’s needs.
“This report is an effort to deliver practical and tangible solutions to advocates and policymakers. By providing regionally relevant, annually replicable data that considers unique drivers of housing underproduction, advocates and policymakers can spot trends more easily and respond to them in ways that will improve lives, economies and the planet,” the researchers wrote.