Affordable Single-Family Homes Will Spur Greater Growth

Originally published by: Wall Street JournalSeptember 14, 2016

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Building sprawling suburbs is better at making cities affordable than building tall towers, according to research released Wednesday.

Environmentalists, urban planners and economists are pushing cities such as New York and San Francisco to build more housing to help combat rapidly rising rents and home prices that are crowding out the middle class. But trying to build upward in order to keep cities accessible to average families may be a losing battle, according to findings to be released Wednesday by BuildZoom, a website for contractors.

Even cities that were able to increase the pace of housing construction without sprawling, such as Portland and Seattle, were unable to keep pace with demand nearly as well as their counterparts that spread outward. Portland saw inflation-adjusted home values increase 78% from 1980 to 2010 and Seattle saw home prices jump 119%, according to BuildZoom. Meanwhile, Las Vegas saw real home values increase just 4.7% and Atlanta saw a mere 14% jump.

There are a variety of reasons why building up has proven less effective at keeping housing costs down. For one, tall buildings are more expensive to build than single-family homes, so the apartments and condos in them tend to be pricier.

If American cities were willing to level single-family homes and build apartment towers, they could likely keep up with demand without sprawl, but that is unlikely given the political power given to local community groups and the radical changes that would mean to virtually any American city outside of Manhattan.

“The big takeaway is that if expensive cities like New York and San Francisco want to do something about affordability they have to do so at a scale that is unprecedented in this country,” said Issi Romem, chief economist at BuildZoom. “Realistically the odds of that happening are slim to none.”

Indeed, housing production in the U.S. remains overwhelmingly concentrated in suburban, not urban areas. More than 88% of new homes in the 2000s were built in undeveloped or suburban areas, according to BuildZoom.

To be sure, there are many reasons to continue building up even if it is unlikely to offer a solution to rising housing costs. For cities like San Francisco that are bounded by hills and waters, there may be little other choice. For those like Atlanta and Houston that have sprawled for decades, commute times and pollution offer incentives to curb outward growth. The cost of driving long distances also partly offsets the benefits of cheaper housing from sprawl.

The findings ultimately seem to offer two unappealing scenarios: a future in which cities continue to eat into the neighboring countryside and commute times and pollution rises, or one in which home prices in some cities will become out of reach for more people.

“What you’ll get there is an exacerbation of the problems we already have in expensive cities. The distinction between homeowners and renters will become less and less a stage of life and more and more if your parents can help you. That’s not a future that seems very welcoming to me,” Mr. Romem said.


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