[ For Americans to live a productive, prosperous, happy life,
homes need to be truly abundant.]
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THE U.S. NEEDS MORE HOUSING THAN ALMOST ANYONE CAN IMAGINE  
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Annie Lowrey
November 21, 2022
The Atlantic
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_ For Americans to live a productive, prosperous, happy life, homes
need to be truly abundant. _

, Katie Martin / The Atlantic; Getty

 

How many homes must the United States’ expensive coastal cities
build to become affordable for middle-class and working-poor families
again? Over the past few weeks, I asked a number of housing experts
that question. I expected a straightforward response: _If you build X
units, you reduce rents by Y percent—which means that Washington,
D.C., needs to build Z units to become broadly affordable again._

I did not get such a simple answer. “That’s a difficult question
with a lot of moving parts,” Jenny Schuetz of the Brookings
Institution told me. “Are we assuming that all of these homes drop
out of the sky today?” asked David Garcia, the policy director at
the Terner Center for Housing Innovation at UC Berkeley. Chris
Herbert, the managing director of the Harvard Joint Center for Housing
Studies, gave me a long response involving land prices, rental
affordability, household formation, and building trends.

Still, all agreed that whatever the number is, it’s enormous. “All
the numbers we have that address this question are huge. They’re
massive,” Garcia said. “And they’re all a massive undercount.”

That strikes me as a problem. No one can say just what it would take
to make Brooklyn affordable for workers who don’t have a college
degree, render San Francisco accessible to families with kids and
elderly couples on fixed incomes, or allow extended-family members in
Boston to buy apartments within a few blocks of one another. That
means we have no policy vision of how to make our biggest, most
productive places affordable for all, and no plan to get there.

This is not just unfair to Americans who want to move to these places.
High rents and sale prices in major cities are a policy choice, one
that puts gates around many of our most wonderful places and taxes the
folks lucky enough to live there. And it is unfair to all of us. A
United States with more abundant housing in its big cities would have
a more productive, vibrant, and dynamic economy too.

The best evidence for how much housing we need to build lies in the
prices that people pay today. Nationwide, the share of renters who are
considered “burdened”—spending more than 30 percent of their
income on rent and utilities—has climbed to 47 percent
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in four renters
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11 million—spend more than half their income on shelter. Renters
today spend about 10 more percentage points of their earnings more on
housing than they did in the 1970s
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Meanwhile, rising prices have also forced millions of younger
Americans to delay homeownership
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making it impossible for many to buy their way onto the property
ladder, particularly in California and New York.

People make painful choices: To keep their housing costs in line with
their income, millions of families do not live where they want to or
in the kinds of homes they want to or with the people they want to.
When the mortgage on a townhouse is too costly, families keep renting
their run-down apartment. When a third bedroom costs too much, parents
give up on having a third kid. This is a public-policy catastrophe
too.

The problem is largely, if not exclusively, the result of the country
not permitting enough homes where people want them. Although some
communities in the interior of the country, especially in the South,
have allowed housing construction to keep up with rapid population
growth, the superstar metro areas of the Northeast and West Coast have
not. “The reason California has the affordability problems we have
now is because we did not build,” said Garcia, of the Terner Center.
“In the 1960s, 1970s, even into the 1980s, we built between 200,000
and 300,000 homes per year. In our most recent economic boom, we were
building 100,000 a year.” He added: “That is the start and the end
of the story when it comes to California.”

And elsewhere. New York City issued fewer new housing permits
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the 2010s than it did in the 2000s or in the _1960s_; it has, year
after year, created more jobs than homes. Nationally, “household
growth and new construction have been essentially coincident for the
last seven or eight years,” said Herbert, of Harvard. “Typically,
housing construction exceeds household formation by about 20 percent,
because we’re always removing housing that has outlived its useful
life. We haven’t been doing that for a long time. Just by that very
simple measure, we’re not building enough.”

The answer is to build more. A lot more. Rough estimates of what
economists call the “housing gap”—how much the United States
would have to build to bring it back in line with historical
trends—aren’t difficult to come by:

* Looking at the number of American households and the number of
vacant housing units, Freddie Mac, the government-sponsored purchaser
of mortgage-backed securities, estimates a current supply shortage
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3.8 million units, driven by a 40-year collapse in the construction of
homes smaller than 1,400 square feet.

* The group Up for Growth also arrived at an estimate of 3.8 million
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using data on the total demand for housing and the overall supply of
habitable, available units.

* The National Association of Realtors compared the issuance
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housing permits with the number of jobs created in 174 different metro
areas. It found that only 38 metro regions are permitting enough new
homes to keep up with job growth; in more than a dozen areas,
including New York, the Bay Area, Boston, Los Angeles, Honolulu,
Miami, and Chicago, just one new home is getting built for every
20-plus jobs created. The NAR estimates an “underbuilding gap
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of as many as 7 million units.

These numbers draw on data such as vacancy rates, household-formation
trends, and building trends. But none of the estimates capture what
I’ve come to think of as the affordability gap: the difference
between the housing we have and the housing we would need in order to
ensure that working-class people could once again live in our big
coastal cities for a reasonable cost. Freddie Mac does not purport
that building 3.8 million units would make New York accessible to big
middle-class families and end homelessess in San Francisco. The
National Association of Realtors is not contemplating whether janitors
can walk to work in Boston.

Would filling the housing gap as measured by Freddie Mac or the NAR
make a dent in costs? Absolutely, housing experts said. Studies show
that when builders construct units in a given place, it reduces rents
and sale prices
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nearby blocks, as well as
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neighborhoods
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conversely, restricting construction drives prices up
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calculations do not scale up readily: Knowing that a 10 percent
increase in the housing stock in a given place depresses rents by 1
percent within 500 feet does not mean that San Francisco’s
increasing its housing stock by 500 percent would force rents down by
50 percent.

As a general point, “it’s really hard to imagine the most
expensive cities becoming significantly cheaper,” Schuetz told me.
For one thing, creating new units would cause an increase in household
formation: Young workers could opt for studios rather than shared
apartments; multigenerational households could break apart. For
another thing, high-income, high-cost cities have so much pent-up
demand that any one city would have trouble becoming much more
affordable on its own. If San Francisco built thousands of units, new
parents would stay in the city rather than decamp for the East Bay.
Newcomers would move in from around the region and across the world.

The rate at which a city adds new units would matter too, Garcia
pointed out. Conjuring 10,000 housing units into existence overnight
in Boston, which currently has about 300,000 of them
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would cause prices to plummet. Building them over a decade might slow
the arc of rent prices without ever causing them to fall. The kind of
housing getting built matters as well. If New York were to approve the
construction of thousands of single-room-occupancy units—dorms,
pretty much—that would depress prices for single people and
childless families without immediately affecting prices for parents.

Experts also noted that building more market-rate units would help
wealthy families before it would help middle-class and poor families.
“Saturating the market with more supply would naturally take the
pressure off of landlords who keep raising rents,” says Stephanie
Klasky-Gamer, the president of LA Family Housing, a
homelessness-prevention nonprofit in Los Angeles. “But we’ll never
target our most vulnerable renters if we only build 500,000
market-rate units.”

In one recent survey
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to 40 percent of American adults said they believed that increasing
the housing stock would slash prices and rents; that belief—often
described as “supply skepticism
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turn dampened their enthusiasm for new construction. Such mistrust is
rooted in a confluence of events that countless city dwellers have
seen with their own eyes: The laundromat closes. The
soulless five-over-one condo
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up. Black families leave and white couples flood in. And all the
while, rents surge, making real-estate development look like an engine
of gentrification rather than an engine of affordability.

But that displacement happens only because building dense housing is
illegal in many rich neighborhoods, and because cities build so little
of it overall. “If you want to build enough to really help
low-income people, you’re talking about doing a _lot_ of
building,” Rick Jacobus, an expert on inclusionary housing and the
principal of Street Level Urban Impact Advisors, told me.

As it turns out, two economists had, in a way, answered my question.
Enrico Moretti of UC Berkeley and Chang-Tai Hsieh of the University of
Chicago wanted to know how much GDP and productivity the United States
gives up by throttling the housing supply in its biggest cities. In
a blockbuster 2019 paper
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that if New York, San Jose, and San Francisco—just those three
cities—had the permitting standards of Atlanta or Chicago over the
previous several decades, the U.S. economy would have been roughly $2
trillion bigger in 2009. American households would have earned an
average of $3,685 more a year.

To come up with that estimate, the two economists built a complicated
model that assumed Americans could move wherever their wages allowed
and the housing supply would adjust as it would in a place with
typical permitting standards. In such a world, they estimated in some
associated work
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53 percent of Americans would not live where they are currently
living. San Francisco would have an employed population 510 percent
bigger than it does today—implying an overall population of
something like 4 million, rather than 815,000, with 2 million housing
units instead of 400,000. The Bay Area as a whole would be five times
its current size, the economists estimated. The average city would
lose 80 percent of its population. And New York would be a startling
eight times bigger. Some back-of-the-envelope math (mine, not theirs)
suggests that the United States would have—deep breath
here—perhaps 75 million more housing units
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cities than it currently has.

I asked Moretti about the sheer size of the effects found in his and
Hsieh’s work. “It’s not so implausible to me,” he said. “The
differences in earnings and labor productivity between the areas that
we’re looking at and the rest of the country are so big that if you
expand those local economies, you get these big aggregate benefits.”
In the real world, we miss those big aggregate benefits. We have less
productivity and lower incomes, sure, but also less togetherness, less
creativity, fewer babies, fewer vacations, fewer families living
together, fewer people living how they want.

Moretti, a longtime San Francisco resident, is horrified by the
city’s land-use policies and home prices
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“This is something that is not just intellectual for me but very,
very real, very present,” he said. He described walking by an empty
lot in his neighborhood and being bothered over and over again that it
never became an apartment building or even a single-family home. “It
is inexcusable, not building on an empty lot. There is no way that
having an empty lot in a place like San Francisco makes any sense.”

_Annie Lowrey [[link removed]] is a
staff writer at The Atlantic._

* Housing Crisis
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* unaffordable rent
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* housing policy
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