Housing Policy

The 2010s Were a Terrible Decade for Housing Construction

NIMBYism has dominated housing policy for the last ten years. Will the 2020s be any better?

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A lot of things happened in the past 10 years. A boom in housing construction was not one of them. The 2010s will go down as a decade of historically low housing starts, resulting in higher home prices and rents for some and longer commutes for others.

Last week, Freddie Mae Deputy Chief Economist Len Keifer tweeted out a graph comparing new housing starts over the past six decades. The results are startling.

In the past 10 years, construction started for 9.8 million new housing units in the U.S. That compares to 15.4 million units in the last decade and 13.7 million in the decade before that. (Keifer notes that those numbers don't include manufactured housing, a traditional source of low-income housing. It increased a little, but not enough to change the pattern.)

The national numbers match what we've seen in some of the highest-cost housing markets in the country.

New York City added 509,000 housing units, or about 2.2 units per new job, from 2001 to 2008, according to a recent report from the city's Department of Planning. It added only 457,000 units, or .5 new units per new job, from 2009 to 2018.

In 2018, the Californian authorities permitted 117,892 new units of housing for the state's nearly 40 million residents, according to California's Department of Finance. By comparison, the Golden State issued 131,732 housing permits in 1975 (the earliest year data is available), despite having only 21.5 million residents.

The question isn't whether government regulation has constrained supply. Rather its which government regulations have restricted supply the most.

Some scholars like to point to zoning restrictions that prevent developers from constructing taller, denser apartment buildings in high-demand urban areas. Others stress urban growth boundaries that block new suburban housing.

On top of this are historical preservation laws, environmental regulations, and prevailing wage requirements for construction workers. Whatever their other policy merits may be these all increase the costs of building new homes.

"The bigger background narrative is NIMBYism generally," says Salim Furth, an urban policy expert at the Mercatus Center. "It's not that localities have planned for housing and have just done it in a way that doesn't produce quite enough. There's a visceral 'just don't build anything here' attitude that is prevailing in most American suburbs today."

A 2016 National Association of Home Builders (NAHB) study estimates that regulatory costs have increased the price of a new single-family home by 30 percent in the first half of the decade. Another NAHB study found that regulations account for a third of new multifamily regulatory costs.

The people who bear the burden of these regulations are renters and new home purchasers who find themselves shelling out more money for the same amount of housing.

An October report from Apartment List put the percentage of cost-burdened renters (those paying more than 30 percent of their income in rent) at just under 50 percent. In 1960 only 24 percent of renters were cost-burdened. Some have chosen to save on housing by spending more time behind the wheel: The Washington Post reports that Americans commuting longer than ever before.

Policy makers are starting to wake up to the problem of a government-induced housing affordability crisis. Occasionally they are even passing good policies.

California has significantly deregulated the construction of granny flats, resulting in a massive spike in the construction of those units in places like Los Angeles. Seattle has done the same, while also upzoning some city neighborhoods to allow for denser residential and commercial development. Oregon and Minneapolis both abolished single-family-only zoning laws.

Alas, these reforms have often been coupled with counterproductive price controls. Both California and Oregon passed caps on rental price increases this year. New York similarly strengthened pre-existing limits on rent increases in New York City. It has also given local governments the authority to pass their own rent control laws.

On balance, Furth believes housing policy is moving in the right direction at the federal and state level. But he thinks that is counteracted at the local level, where the trend is toward giving planners more power to micromanage what new housing will look like.

"That allows local elected officials to have a seat at the table designing and planning everything. They have certain priorities that never include affordability," Furth tells Reason. Local governments have an incentive, he says, to boost tax revenue above all else. That leads them to zone for higher-quality housing that will attract wealthy residents who pay a lot in taxes but consume few services.

In California, the high levels of discretion built into the permitting process allows activists and other self-interested parties to slow down new development. But other cities, such as Des Moines, are moving in the direction of zoning for higher-quality, higher-priced homes.

Some cities, such as Houston, have managed to stay affordable despite tremendous growth precisely because local officials have decided not to micromanage what new housing will look like or where it can be built.

Getting other cities to embrace a lighter-touch regulatory approach requires policy changes. It also requires people to accept having less control over what other people do with their property.

"We need to change the way that we think about property and neighbors," says Furth. "We have a pattern of thinking that is just going to lead to worse and worse outcomes."

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  1. But the 2010’s were a great decade for a lot of other things:

    https://spectator.us/just-best-decade-human-history-seriously/

    One of my favorite parts from the article:

    …next time you hear Sir David Attenborough say: ‘Anyone who thinks that you can have infinite growth on a planet with finite resources is either a madman or an economist’, ask him this: ‘But what if economic growth means using less stuff, not more?’ For example, a normal drink can today contains 13 grams of aluminum, much of it recycled. In 1959, it contained 85 grams. Substituting the former for the latter is a contribution to economic growth, but it reduces the resources consumed per drink.

    As for Britain, our consumption of ‘stuff’ probably peaked around the turn of the century — an achievement that has gone almost entirely unnoticed. But the evidence is there. In 2011 Chris Goodall, an investor in electric vehicles, published research showing that the UK was now using not just relatively less ‘stuff’ every year, but absolutely less. Events have since vindicated his thesis. The quantity of all resources consumed per person in Britain (domestic extraction of biomass, metals, minerals and fossil fuels, plus imports minus exports) fell by a third between 2000 and 2017, from 13.7 tons to 9.4 tons. That’s a faster decline than the increase in the number of people, so it means fewer resources consumed overall.

    1. Clearly David Attenborough has no idea what “growth” means, or he has his own very weird definition.

  2. Until American Boomers and the quickly aging gen-Xers start to value their children’s future and well-being more than they value the price of their real estate, nothing will ever change.

    Older Americans climbed the economic ladder and then kicked it over so they could reap all the benefits of the American system while stealing future wealth from their own children. They really are the most selfish people I’ve ever met.

    1. If they actually understood that this was the net result of their preferred policies, they probably wouldn’t’ve done it. They’re not particularly more selfish than any other group of humans, they just trusted the politicians who promised them lots of stuff and hand-waved the consequences.

      1. That seems the more likely explanation.

        1. Sounds like more of an excuse than an explanation.

          1. “So they could reap all the benefits………. while stealing future wealth…….” sounds more like an excuse to me. Wealth is a fixed pie, right? No, I’m not a boomer.

            Everything is so terrible and unfair. Haha.

    2. Sure we did.

      The only crime that Boomers committed was raising a generation of slacking entitled whiners.

      1. Your generation won’t let developers houses be built for the next generation because of your property values. It’s sickening and one of the most unAmerican thing a generation has ever done.

        1. So you want developers to build cheap houses in pricey neighborhoods instead of finding a place you can afford?

          So many victims.

          1. If the person who owns the land in those pricey neighborhoods wants to build cheap homes there then yes, that’s exactly what I want.

            With that said, in this day and age we’re mostly talking about cheap subdivisions in pricey suburbs or apartments in areas with single family homes rather than significant construction in an already established neighborhood.

    3. Adjusted for inflation my house is worth less than I paid for it 28 years ago. Meanwhile my 30 year old son makes more in a year than I ever did in 45 years of employment. But I’m a selfish boomer. Fuck you.

  3. All is going exactly as I have foreseen – –
    Soon the time will be right to confiscate land and build dorms for the workers, and demand they live where we tell them. The dorms will be close to the assigned work places, so private transportation will be eliminated and we can track all movements on the transit systems. The company stores will not accept cash, so we can track all transactions. Only then will we reveal the true purpose of our great society.

    1. Cat videos?

      1. Watching endless reboots of film franchises?

  4. Given that “serious” economists 10 years ago were arguing we should destroy large numbers of houses to reduce supply …

  5. 11 years ago there was a building boom for those who it turned out couldn’t afford them by orders of the federal government and everything came crashing down so bad that that many left the construction trades and few are willing to go back hence a shortage of workers to build the needed houses. of course next year in California all new homes have to have solar panels, that a $20k to $30k boost in housing prices which will actually increase the value of existing homes making it even harder for people to find housing

  6. Not buying it.

    If everyone under 40 had not decided to live in the same faddish metro areas (and in the same hipster neighborhoods) we would not have a “housing crisis”. Try driving across the country and off the interstates. You will see entire towns for sale–lots of places to live and run businesses.

    Face it–this issue, like most, is self-inflicted.

    1. Sure, ignore data and hard facts. You got yours, fuck everyone else, amirite?

    2. If, by ‘self,’ you are speaking of the groups of people/polities (e.g. Kalifornia, NYC, etc) who have collectively imposed this upon themselves, then yes.

    3. Believe it or not but there are actually people who grew up in those metro areas and who just want to stay near their family. But this problem isn’t being caused by inordinate demand. It’s entirely about supply restrictions.

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  9. Something is amiss in this summary:

    “Another NAHB study found that regulations account for a third of new multifamily regulatory costs.”

    So what are the things that are not regulations that comprise two thirds of regulatory costs?

    1. Materials and labor and land

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  11. The “environmentalists” (Al Gore – Democratic Leadership) planted that ‘just don’t build anything here’ mentality into society with high-priced propaganda. Starting (as far as I remember) with the tree-huggers and growing into a globalist (baaaahhhh-sheeple) scream about the weather changing.

    I’m just waiting for them to start screaming at the sun rising every morning too. baaaahhh. baaaaahh…

  12. In my area (NETN) the main thing that has limited new single family home starts is market forces – the builders cannot build inexpensive (ie. sub $200k) homes that will compete with the existing home market. It should be possible, but where buyers will accept an old and dated existing home they expect every new home to have all the bells and whistles.

    Practically speaking this has meant that construction here has been mstly multi family dwellings and high end single family homes.

  13. I’m struggling to reconcile the different quadrants of Reason ideology. Despite the fact that the US population has doubled in my lifetime (150M to 320M), Ronald Bailey says it will level off shortly and then decline. If that’s the case, why do we need more houses?

  14. In practical terms, this has meant that the construction here has been multi-family homes and high-end single-family homes.
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