'Crisis' Warning Over Housing Market Affordability
A construction worker hammers nails into the framing of a new home in a development June 26, 2006 in Richmond, California.
Experts warned that U.S. cities may be failing in their approach to dealing with “what is widely regarded as a housing-affordability crisis” if current housebuilding strategies do not change.
Amid a historic housing supply shortage, a new working paper by Harvard University’s Joint Center for Housing Studies posits that continuing to build more homes in the suburbs in the hope this will bring down hosing costs in cities may not be effective.
The research suggested that the continued focus on new suburban housing has had a negligible effect on rising housing costs for urban households.
The analysis drew on data from the Census Bureau, focusing on “residential vacancy chains,” which the report describes as: “the series of moves between housing units initiated by new housing construction.”
According to the report’s findings – which are preliminary – expanding suburban houses “has little effect on urban housing affordability or on the welfare of low-income urban households.”
“Each new suburban home leads to only .015 moves in low-income urban neighborhoods.”
In other words, the benefits offered by new homebuilding outside of densely populated urban areas rarely reach those who live in such areas.
There are generally two main schools of thought regarding how best to alleviate housing costs that are increasingly viewed as unaffordable.
According to the report, some argue that building homes of any kind, anywhere, is the simple solution.
The authors of this new paper instead advocate for a more targeted approach.
They said that since the effects of suburban housebuilding are little felt by urban dwellers, any house-building should be focused in the areas it is particularly needed.
“New suburban housing supply has little effect on urban housing affordability or on the welfare of low-income urban households,” they wrote.
They said low and middle-income urban households would benefit most from “policies that increase the supply of housing that is financially and geographically accessible to those households.”
“Currently, our findings are preliminary and subject to change – there’s more work we have to do with the data before we can feel confident enough in our results that we can comment,” Valentine Gilbert, co-author of the report told Newsweek.
A recent report from Bankrate, based on analysis of Zillow and Redfin housing data, found that in all 50 of the U.S.’s largest metros, it was now cheaper to rent than to buy.
Mortgage rates are likely to remain high as the Federal Reserve announced on Wednesday it will hold interest rates at 5.5 percent.
In April, Florida house prices continued to rise despite rising interest rates, a development described by experts at Florida Atlantic University and Florida International University as a “worrying sign” for the state’s housing market.
Update, 5/2/24, 10:05 a.m. ET: This article was updated after comment from the paper’s author.
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