The conversation on America’s affordable housing crisis is often fueled by anecdotes. Journalists and activists tell tales of gentrification, eviction and displacement from within their increasingly expensive cities. Then, when new housing is built that is even more expensive, the housing itself is presented as the cause, and more construction is discouraged. But a look at the numbers shows that, on the contrary, housing construction (or lack thereof) seems to be the driving factor behind whether or not large U.S. metros remain affordable.
This would be the conclusion from 7 years of data from the Census Bureau, which publishes annual lists on the number of new privately-owned housing units authorized in each metro area. Between 2010 and 2016, when overall national housing permits ticked up each year following the recession, most major metros have issued housing permit numbers in the high 4- or low 5-figures annually. But three metros have stood far above the rest.
The Dallas-Fort Worth-Arlington MSA issued 273,853 housing permits over this 7-year period; New York-Newark-Jersey City issued 283,814; and Houston-The Woodlands-Sugar Land topped every metro with 316,639 permits. Combined, the 3 metros accounted for 13.5% of the nation's approved housing units.
Other metros weren't even close to these three.
Los Angeles was in fourth place with 160,278, while the Washington and Atlanta metros had slightly lower figures than L.A. Most of the 51 major metros didn't crack 100,000.
While other variables factor in, such as the demand for living in specific areas, the data leads to certain conclusions. To see how, let's look at the nation's 11 largest metro areas, which include the 6 listed above, plus Chicago, Philadelphia, Miami, Boston and San Francisco. These metros vary somewhat, but are cut from the same cloth--they would all fit sociologist Saskia Sassen's "Global City" description, given they are massive agglomerations for business and wealth. And except for Chicago and Philadelphia--which both still have their other foot in the post-industrial decline model--all of them are growing rapidly by population, increasing by at least 200,000 people from early 2010 to mid-2015, and in many cases by 2 or 3 times that. It stands to reason, then, that this massive jobs and population growth would lead to a dogfight for housing in each of these metros, as large numbers of wealthy and non-wealthy people compete for the limited supply.
But this is the case only in some metros, not others.
Houston and Dallas are the most notable examples of where such scarcity has not occurred--in fact, it's almost been the opposite. Between 2010 and 2015, these two metros had the most net population growth, at 736,531 and 676,582, respectively. They are also perennially among the leaders in corporate and business relocation, job growth, and wage growth. But they have the 2nd and 3rd cheapest median home prices of the 11 metros, at $176,000 and $202,000, respectively (all housing price figures are from Zillow). Atlanta--with the nation's 5th most permits since 2010--was just under Houston at $174,000.
Even more crucially, the prices in these two Texas giants have stabilized even amid this incredible population boom--especially in Houston. Since April of 2010, average median home prices there have risen by $44,000. Compare this with similar Sunbelt metros that have strong economies and growth, but not nearly the same number of housing permits. The median home price growth over that period was $56,000 in Nashville; $63,000 in Tampa; $77,000 in Phoenix; $81,000 in Austin; and $102,000 in Miami-Dade County.
The New York City metro makes for a different yet no less illustrative case. The popular wisdom seems to be that the city can never build its way into affordability--that its innate desirability immunizes it from the laws of supply and demand. But, contrary to its Nimby reputation, it's been erring on the supply-side solution rather heavily these last few years (it should be noted, however, that many of the units that are built, especially in the city, still suffer price inflation thanks to high government approval costs).
This New York metro construction wave--which hit a peak for all U.S. metros in 2015, when 86,424 permits were issued--contributed to falling rents in the city throughout the latter half of 2016. The metro area median home price really isn't that bad, either, sitting at $405,000. And compared to U.S. metros with similar density, demand, and decades-long track records of Nimbyism that inflate housing prices, New York's housing market, too, has stabilized. Since April 2010, its median home prices have risen $38,000. In Los Angeles County, prices were at a similar starting point with New York at that time--$397,000--but have since risen by $155,000, to $552,000. In the Washington metro they've risen by $59,000. In the Boston metro (73,760 permits issued between 2010-2016), prices rose by $92,000. In San Francisco-Oakland-Hayward (68,865 permits between 2010-2016), they rose from $529,000 to $834,000--a whopping $305,000 increase.
These statistics are glaring, and show that the urban housing affordability crisis, and its solution, is far simpler than many pundits suspect. In their ongoing quest to satisfy their anti-growth biases, they've settled on demand-side responses (read: government subsidies) that ignore or worsen the fundamental problem of under-supply; while they continue to blame various third party boogeymen, including developers, landlords, Airbnb hosts, techies, hipsters, Asian families buying second homes, and migrants in general.
But, again, the Census data sheds light on the actual nature of the issue: some metros in America are building a LOT of housing. Other metros may think they are, but actually are not. And housing prices within given metros are either stabilizing or skyrocketing based on this decision. While it's not clear just how many units metros like San Francisco need to reach market equilibrium, it's obviously more than 10,000 per year, given that the population is growing by 60,000 people annually. Meanwhile, only 3 of these major destination metros are issuing truly significant permit numbers, and only two of them--Dallas and Houston--are doing so without tacking on a bunch of added regulatory costs. Not coincidentally, they're also America's two leading affordability success stories, growing by the largest raw population numbers, yet maintaining some of the cheapest housing.
[This article was originally published by Forbes.]
Scott Beyer owns and manages The Market Urbanism Report. He is a roving cross-country journalist who writes regular columns for Forbes, Governing Magazine and HousingOnline.com.
A podcast on Market Urbanism, or the cross between free-market policies and urban issues. We discuss how a liberalized urban approach would lead to more housing, faster transport, improved public services, and better quality of life. Tap to listen.
Market Urbanism Report is sponsored by Panoramic Interests, a progressive developer in San Francisco. Panoramic, which is owned by Patrick Kennedy, specializes in 160 sqft micro-units (called MicroPads) that are built using modular construction materials. Panoramic has long touted these units as a cost-effective way to house San Francisco’s growing homeless population. But Panoramic also builds larger units of between 440-690 sqft. To learn more about Panoramic’s micro-unit model, read MUR’s coverage on the firm in its America’s Progressive Developers series. Or visit Panoramic’s website.