With possibly as many as six million fewer housing units available than people who want to live in them, the United States is not alone in countries facing a housing crisis. The United Kingdom, Ireland and New Zealand are among others where the number of places available to live are being outstripped by the demands of the population. However, the reasons for the crisis differ from place to place, and even across the U.S., there is no consensus on what is driving it.
What is certain is that the costs go beyond people being unable to purchase a home and enjoy the financial security that provides. Not enough housing has also led to an increase in homelessness. The solution must be multi-faceted, but that involves understanding the causes.
It’s currently a seller’s market, but being a seller implies that someone is also going to be a buyer. That means that while things may go exceptionally well on the selling end of things, the same person might still be at a disadvantage when trying to purchase a home. The best bet for current homeowners may be to stay where they are while the market continues to be volatile.
If a home doesn’t meet their present needs, remodeling might be the right choice. Some homeowners may end up deciding to stay in their homes if they are able to make the necessary changes without having to move. They may be surprised at what kind of renovations are available.
This goes beyond adding on a room and could include something as seemingly unusual as installing a small home elevator, which can keep a home accessible for mobility impaired individuals. For those who want to buy a home and aren’t yet able to, the waiting game may be the best move. This can protect them if the bottom falls out of the housing market.
Another option, particularly for those who have reliable remote work, might be moving to a part of the country where housing remains relatively inexpensive. Those who are determined to buy should look for a home that is well under their budget, reduce their demands for contingencies and anticipate paying more than the asking price. In the last decade, the number of housing units available proportional to the population has declined, and one of the culprits is institutional investors.
Companies that may have billions of dollars they can put toward buying up homes and apartments in any community that they can then rent out for a profit. Institutional investors continue to buy up inventory, and for less than median prices. That means that they are also buying up the most affordable properties that individuals and families might use to get on the property ladder in the first place.
In some states such as Texas, Oklahoma, and Alabama, the percentage of homes bought by institutional investors is considerably higher. The issues are not just with companies buying up low-cost homes. An influx of luxury construction may be responsible as well.
In the 1970’s, there was a boom with millions of housing units built in the United States. Between 2016 and 2019, that number dropped to less than one-third that amount. Today, more apartment units were built than had been constructed in the last 50 years. However, many of those units were luxury apartments, or they are marketed as such to the high wage earners who will be renting or purchasing and living in them in the largest cities.
Rent in these apartments can be thousands of dollars each month, which puts them out of reach of many people. Lawmakers are discussing both housing subsidies and increased regulation to address this issue. However, there may also be a problem with people wanting to live in or near apartments at all.
Zoning restrictions in several areas, including parts of San Francisco and New York City, forbid the construction of dense housing. In the U.S. and the U.K., there is a preference for single-family homes as opposed to apartment dwellings compared to in Western Europe, where there has been much more housing construction. It is possible that both zoning laws and a general antipathy to living more densely are both factors.
The housing crisis may be in part due to the aging of the large millennial generation, who are getting old enough to become tired of communal living and are moving out into their own places. This means two or three people who might have occupied a single unit now need two or three placese to call home of their own. In addition, the rise in people working from home means that some individuals are looking for more space. Where a one-bedroom apartment might have previously suited while commuting, a two-bedroom might now be necessary so that one can serve as an office to conduct business as the hybrid work model seems here to stay.