REPOST: Luca Gattoni-Celli, "The Housing Shortage Is a Literal Shortage"
A post popped up on my LinkedIn feed that repeated what we all know: THE RENT IS TOO DAMN HIGH! This clear-eyed analysis acknowledges a simple truth: we're not building enough houses. It doesn’t dive too hard into zoning laws, the Herculean trials of the permitting process, and the allure of luxury condos that sit empty, or many reasons for this shortage.
This topic hits close to home. I recently dove into a group project aimed at untangling the byzantine permitting process. By harnessing the power of AI to analyze Autocad/Revit Models, my team and I dreamed of streamlining construction's most notorious bottleneck. The idea was to let AI identify potential snags and propose solutions in different permitting areas (ex: fire safety, parking, pipe and cable placement). I pushed the team towards strategizing partnerships with two or three big construction companies, in order to access their (expensive) models. They pushed for voodoo. So I decided to split, before wasting time on magic solutions to a real issue.
To dive deeper into this crisis and perhaps find a glimmer of a solution, check out these compelling reads. The first, from USA Today, unpacks the dire state of housing affordability and construction. The second, a deeper dive by Luca on Substack, lays bare the literal foundations of our shortage woes.
Link 1: https://www.usatoday.com/story/opinion/2024/03/12/housing-prices-rent-home-construction/72929892007/
Link 2: https://lucagattonicelli.substack.com/p/the-housing-shortage-is-a-literal
Rising home prices create an enormous burden. So why aren't we building more houses?
Redfin calculated that only 15.5% of homes bought in 2023 would have a mortgage costing less than 30% of local median income.
Luca Gattoni-Celli; March 12, 2024
Five years ago, when a real estate agent advised my wife and me to make an offer on a house we had seen only once − at night − and were unsure about, I thought she was being ridiculous. Today, I concede that she was being pragmatic because buyers significantly outnumbered sellers.
We bought another home before it was listed, happening to spot the “Coming Soon” sign out front. That was my preview of the housing shortage. Then COVID-19 supercharged the national housing crisis.
You may know the rule of thumb not to spend more than 30% of your income on housing. Redfin calculated that only 15.5% of homes bought last year would have a mortgage costing less than 30% of local median income, a record well below the pre-pandemic norm.
A new report from Harvard’s Joint Center for Housing Studies found that in 2022, a record half of U.S. renters were “cost burdened,” spending more than 30% of their income on rent and utilities. About 27% of renter households spent more than half of their income on housing.
The root cause of this financial hardship is a shortage of homes, although some housing advocates question or deny that reality. But the housing shortage is a literal shortage. We can see it from various pieces of evidence.
Housing price index is at near record high
America built far fewer homes in recent years. U.S. private home construction crashed before the 2008 mortgage crisis (measured in total units). Only in late 2021 did it climb back up to its pre-Great Recession peak.
Homebuilding is rebounding, but we have a lot of catching up to do. The Case-Shiller housing price index sits near an all-time high.
The median age of first-time homebuyers also is near a record high, at 35.
Investment firms have owned many multifamily buildings for decades. They now are buying a significant number of houses because they expect a continued shortage to boost those properties’ values.
Economists argue about inflation and minimum wage laws, but they overwhelmingly agree we have a housing shortage. “Place the Blame Where It Belongs,” declared a recent Urban Institute report on the shortage. Economists are still figuring out how to measure it, but various estimates place the national shortage of homes in a broad range, from 4 million to 20 million.
Redfin calculated that only 15.5% of homes bought in 2023 would have a mortage costing less than 30% of local median income.
Scott Olson, Getty Images
Rising rents trigger increase in people without stable housing
It was a moment, not a number, that finally convinced me of the housing shortage. I started an all-volunteer housing advocacy group in 2021 and about a year later was invited to tour a homeless shelter. A staff member explained that rising rents had increased the local population without stable housing, and that the shelter struggled to find available homes to place its clients in.
I have since heard the same thing from staff at other shelters in my state. I have also heard chilling stories about residents of my city living in unsafe, overcrowded conditions.
Low supply lets landlords jack up rents. It prevents people from leaving abusive partners. It forces California college students to sleep in their cars.
The housing shortage is all too real. Only building many more homes will make housing affordable again.
Luca Gattoni-Celli is a Young Voices contributor and the founder of YIMBYs of Northern Virginia. Follow him on X @TheGattoniCelli
The Housing Shortage Is a Literal Shortage
Expanding on my USA Today op-ed
LUCA GATTONI-CELLI; MAR 20, 2024
Carpenter’s Shelter in Alexandria, the homeless shelter where I had a small epiphany about the housing shortage (image source: Cooper Carry).
This week, I am expanding on my recent USA Today op-ed, which argued that the housing shortage is a literal shortage. I was and am thrilled to bring that message to a large general audience. Establishing the basic fact of the housing shortage feels extra important because, in truth, I questioned it for more than a year after founding YIMBYs of NoVA in late August 2021.
Obviously housing was too expensive, and I believed the shortage narrative enough to repeat it with my conscience intact and build my group’s messaging around it, yet I doubted. The market cleared on a basic level, right? Supply met demand, strictly speaking. Although homelessness was increasing, I reasoned that if a housing shortage truly were the root cause of the affordability crisis, the shortage’s scale would dwarf the number of people without stable housing. I had a feeling homelessness was circumstantial evidence, not a smoking gun. The November 2022 visit to a homeless shelter I write about USA Today (and elsewhere), did help convince me of the shortage:1
A staff member [who gave my friend and I a tour of the shelter] explained that rising rents had increased the local population without stable housing, and that the shelter struggled to find available homes to place its clients in.
The image of a literal shortage of roofs to put over people’s heads was vivid.
I also allude to hearing disturbing stories of people living in overcrowded conditions in my city, Alexandria, Virginia. That was far more recent and easily the most memorable, emotionally salient, and disturbing moment in my time as a housing advocate so far. My blood ran cold and I basically stared into space for an hour. I had some prior awareness, but realizing how common it was hit me like a freight train. I had long wondered, how does the average person without a college degree afford to live in this region, where so many residents have advanced degrees and the median income is about $120,000? The answer is that they super-commute or make the grim choice to live in overcrowded, unsafe, sometimes degrading conditions. Or they cannot afford to live here and are locked out of the DC area’s recession-proof economy.
Quite a few recent immigrants, some undocumented, live in overcrowded housing, but so do regular working people and students. The story is similar to folks renting a room in a gray-market boarding house: seldom discussed yet deceptively common. Though folks living in overcrowded conditions have even less incentive to be open about it, giving their landlords excessive leverage.
The national housing shortage is a broad topic and I wanted to hit 600 words to have a shot at USA Today, so I was careful about the scope of my op-ed. My biggest omission was the “vacancy truther” thesis that there are plenty of unoccupied homes, enough to shelter all American residents without stable housing. Though I am confident that thesis is wrong, I do not have a full command of the evidence against it, from how vacancies are actually calculated, to the condition of vacant homes, to their location (embedded at the bottom is a great video essay on vacancies by my favorite urbanist YouTubers). Major critique or not, it was too messy to broach.
However, I did want to address the widespread belief that investment firms are purchasing many single-family homes (which is true) and artificially raising prices. Many normies I had pitched on YIMBY immediately complained about Wall Street buying up houses, including a nurse who was wheeling me to an X-ray.2 Being an economic and financial story gives it an air of sophistication and direct relevance to housing shortage claims. Most of my graf on that topic was edited out — which I serenely accept as a normal part of op-ed publishing — so I am sharing it in full:
Investment firms have owned many multi-family buildings for decades. They are buying houses because they expect a continued shortage to boost those properties’ values. Invitation Homes, Inc. famously told investors in 2017: “We have selected markets that we believe will experience strong population, household formation and employment growth and exhibit constrained levels of new home construction.” The firm listed “overbuilding” as a risk to its strategy.
In real life, I like to tell folks that hedge funds would not be buying boring single-family homes unless there were something really messed up about the housing market that made them a speculative financial asset. There is a subversive YIMBY argument that these investment firms actually give renters access to high-opportunity neighborhoods where they could not afford to buy a home. I am not sure that is a winning message, but it is funny and seems correct on its face.
I have a similar reaction to investment firms renting out houses on the right side of the tracks and to big property management firms using sophisticated software to maximize the rents they charge: That is what the market will bear. Even if we accept the premise that these practices are abusive, to stamp them out we must lower the prices that the housing markets will bear. Doing so will entail increasing inventory and opening a largely insulated, absurdly overregulated economic sector to stiff competition. It will also take considerable time, leaving plenty of room for consideration of short-term interventions like vouchers and other subsidies.
YIMBYs should work to make beige suburban homes, and apartment buildings for that matter, a less gratuitously profitable investment. It’s time to overbuild.
From the beginnings of our nation, Americans have migrated hundreds of miles for a brighter opportunity. In the past decade or so, lower cost of living, including cheap housing, has become a key driver of internal population flows. “I moved hundreds of miles because here I could afford shelter” is no one's vision of the American dream.
As more people learn how restrictive zoning and other land use regulations cause them and their loved ones profound hardship, housing advocates will continue to turn the tide. I am grateful to Young Voices for the opportunity to publish in USA Today more than a decade after I was an editorial intern there. Read my op-ed about the housing shortage by clicking this link.
1 I wish I had phrased it that way in the USA Today: “helped fully convince me.”
2 I was fine though the episode helped inspire my warning to fellow YIMBYs about avoiding burnout. Yes it is crazy that I was evangelizing for housing in the ER, not the sort of thing I would do anymore!
