“What’s Wrong with Housing in America?”

Last week Home Builder Magazine ran 4 stories titled “What’s Wrong With Housing in America?” by Scott Cox, principal at Denver Colorado-based SLC Advisors, a home building, land development and investor consultancy that manages company level investments, housing and community development projects and repositioning/work-outs. Scott, is a licensed architect with broad experience in banking, development and project management,

So, what’s the problem? In short, Scott says, we don’t build enough homes to meet demand and thus keep home prices affordable. TRUE! Second, he asked “why did we get here and why this is such a national problem? It all starts with strong job growth that attracts more people to move to that city or metro area. Job growth drives housing growth.

Then, protests from homeowners in established neighborhoods erupt trying to stop or slow down housing growth. Please see my above story about the Town of Morrison. And not only do homeowners complain so do environmentalists because to them “growth is a dirty word.”

Scott states, “We can say unequivocally that homeowners’ active stifling of housing growth is systematically denying the American dream to young people across the country. It’s morally wrong and is one of the single greatest contributors to the growing income inequality in this country and the lack of mobility between economic classes.”AMEN!!!

In his second story he described the REAL REASONS housing is so expensive.
There is not enough approved land to build on. Why? “The entitlement process is incredibly long, unpredictable, random and capricious. Large-scale communities (Sterling Ranch) often take over 10 years in the planning stage to bring their development from an idea to the construction of the first home.”
People don’t want more density; but we will not solve our housing shortage without MORE DENSITY.
Many cities and towns now require expensive exterior design standards such as stucco or brick and these standards make housing more expensive. I would also add in all the open space and parks requirements for each new subdivision.
“Excessively high government-mandated building standards,” such as solar panels or other energy saving features.
“Failure of government to fund infrastructure”—Bbuilders are required to fix problems of the past that the local government has not kept up with. “So new homeowners or renters will have to pay for the past mistakes”.
Rapidly rising costs for materials and labor.

In part 3 of his story he answers the question, “Why is it so hard to get enough projects approved to hold down the cost of land?” “Because our process for entitling projects is COMPLETELY DYSFUNCTIONAL. It would in fact be hard to design a system less inclined to produce housing.” Here are the key impediments according to Scott—
Land use approvals are very local and not regional. Thus, local politicians face great pressure to not approve new projects by the current homeowners. Scott says, “Most politicians now are simply ‘reflecting the will of the people.’” I believe our leaders are NOT leading us! Whereas, if land use approvals were done at a regional level NIMBYness would have far less impact. This is why I believe we need 1 set of rules and regulations for land use and construction standards for the entire metro area or even the entire Front Range from Ft. Collins to CO Springs.
Our property tax policies favor current homeowners. Second, cities and counties love car dealerships because of the sale tax revenue, but new housing is bad because there are no sales taxes on homes.
New homeowners often have to pay for special tax districts to pay for the infrastructure needed which is why new home communities have tax rates double or triple of older subdivisions. There are also impact fees that are paid to local cities and this is a per unit fee whether the house is 1000 square feet or 4000 square feet. Thus, builders only build large homes.
“Hypocrisy regarding ‘smart growth’, ‘green’, ‘sustainable’, and ‘maintaining our character’”. He cites Boulder as a great example of this. Scott asks, “At what point in time does the character of a town become exactly right, never to change?” TRUE! Scott says we need to quit hiding behind these terms “while simultaneously claiming to be for affordable housing.” Well said!

Scott’s final part to this great story is “Why the way we are trying to fix this isn’t working.”
He cites Denver’s policy of adding extra fees on residential construction for new affordable housing. “Does anyone think you can make housing more affordable by making it more expensive to build?”
Inclusionary zoning does not shift the supply and demand imbalance at all.
In the past we helped buyers qualify for larger mortgages so they could afford more expensive homes and we know how that ended 12 years ago. Instead, we need to focus on why housing is expensive in the first place.
Our local governments often entice companies to move jobs to their city with tax savings and then with the other hand place moratoriums on building new homes, so that home demand outstrips supply and prices soar.
“None of these ideas are new. All have been tried for years in expensive coastal markets and now being tried in other MSAs. No MSA where it has been tried has seen an improvement in their housing situation.” Correct.

What are Scott’s solutions for an “ideal system” that would help achieve affordable housing?
Land use decisions would be made at the regional level.
Infrastructure would be paid for by the entire community and not just a new subdivision.
Property taxes would be high enough so that new developments no longer feel like a burden to a local city or town. He cited Texas as an example with high property taxes but affordable housing.
To scale back expensive design standards “require our elected officials to show a calculation of the increased cost to a home of every increase in standards. And calculate how many people will be incrementally priced out because of it.”
We would protect our habitat and environment at a bigger macro level instead of the micro level that is currently done.
Each city or town should “proactively search their community for locations appropriate for housing where it does not exist.” Such as parking lots, vacant land, or underperforming commercial buildings “and find out why housing is not being built there.”
Create duplex and triplex zoning in existing SFR neighborhoods. He asks, if a small home can be replaced with a 4500 square foot home, why can’t you build three 1500 square foot attached homes?
Higher density near light rail.
Suburban density needs to increase too.
Withhold state tax dollars from cities and towns that don’t approve sufficient housing in their borders.
Tell everyone you know why housing is so expensive..

This is an incredible story by Scott, but he failed to address the crisis of not enough labor to build new homes as I cover in my Bubble class.