- Aldo Svaldi wrote a great first page cover story in the Denver Post on Sunday titled, “Denver’s Chronic Housing Shortage May Peak this Year, But the Fix Could Take Another Decade.” His story is based on a study that will be released this week titled “Factors Impacting Housing Affordability” that was authored by Phyllis Resnick, lead economist for the Colorado Futures Center at CSU. Here are some highlights from the story—
- Phyllis expects our deficit of needed homes and apartment will peak this year at 32,000 units.
- Bad news is it may take another 10 years or MORE to correct the imbalance.
- Resnick estimates that in 2025 we will still have a housing deficit of 25k units!
- According to the State Demography Office the percentage of vacant housing units as of 2016 was—3.11% in Denver County, 2.33% in Jeffco, 0.39% in Dougco, 0.34% in Adams County and just 0.19% in Arapahoe County. Back in 2010 the vacancy rate ranged from a low of 4.21% in Dougco to the 5% range in Adams, Arapahoe, and Jefferson Counties, with a high of 7.47% in Denver County.
Here are the factors she found that are causing the supply demand imbalance—
- Builders are still cautious about building too many homes as they remember what happened 12 years ago when Resnick estimates metro Denver had 96k more homes and apartments than needed. In my Bubble class I show how builders should have built about 9,600 homes from 2002-2006; instead they built 93k homes.
- Second, builders have about 9% profit margin according to this study, so as builder will you build a $300k home or a $500k home when there is more than enough demand for a $500k home? You get to choose to make $27k or $45k per home.
- Third, residential building construction employment is still 15-20% below our peak a decade ago and it takes more labor to build a home today than it did a decade ago Resnick found.
- Still Resnick is surprised that our labor shortage hasn’t caused an increase in productivity or investment in technology as homes are built much the same way today as they were in the 1950’s. Whereas, manufacturing productivity has increase more than 800-fold since the 1950’s.
- “But shifting to more manufactured parts requires a heavy capital investment that many builders aren’t able or ready to make, given what they endured last decade, Resnick said.” She is IGNORING a major issue on this that I will explain below.
- Fourth, we need our cities and counties to double the amount of land that is zoned residential according to Jeff Whiton at the Homebuilders Association. Jeff said, “I know for a fact that if there were more land available there would be more builders.”
- Fifth, Mr Whiton said, “We have 34 jurisdictions with varying requirements. Standardization is very difficult. Slow processing and slow entitlements is the NUMBER 1 ISSUE that home builders are telling us that they feel right now.” So, it’s not even possible to build factory housing when we have 34 sets of rules.
So, what changes should we make per this study?
An immigration policy that makes more skilled workers available. I agree.
Employing crews from the correction system. For non-violent offenders this would be a great idea possibly. But, would anyone buy a new home in a new neighborhood if they knew a sizable percentage of the construction workers were convicts? Probably not.
Third, adding more factory built modular housing. This is a CRITICAL PIECE. But, will consumers accept this style of housing? Manufactured homes/mobile homes have never gained great acceptance in big metro areas, like they have in rural or farm areas. Even modular housing has never gained acceptance in big metro areas that I am aware of. When people buy a home they don’t want to buy a home that another 400k people bought that year (Toyota Camry).
Change Colorado tax policy that discourages seniors from selling their homes. I assume this is the fact that you must be a senior and have lived in your home for > 10 years to get the property tax rebate.
These 4 “solutions” I believe are all wishful thinking. The first one probably won’t happen with our current president. The second and third solution don’t have consumer acceptance. And the fourth one is a hard sell to seniors who are reliably the number 1 voting bloc every election.
I am disappointed that this report doesn’t address the KEY ISSUES—not enough labor, not enough land, and too much red tape. These are 3 REAL SOLUTIONS that government can help with…if they choose to. Our local government through our high schools and community colleges could help greatly with our labor shortage. Second, our local governments need to create a region-wide housing policy and quit protecting their turf. We need more buildable zoned land! Third, it’s damn ridiculous the red tape builders and their sub-contractors face.
First, we need state-wide licensing standards for all contractors, not county or city approved standards. An electrician or plumber shouldn’t have to be approved and licensed in every individual city and county like it is today. Second, we need the same or incredibly similar codes, regulations, and standards for every home built in the metro area. Third, we need to make it state law that local cities and counties have just say 60-90 days to approve all the permits for each and every home that is built. Our government needs to make it much easier, cheaper, and less time-consuming to build a home. When they do, builders will be able to build a lot more homes I believe.