Our housing supply has not met housing demand for some time now. A study released recently by Harvard University’s Joint Center for Housing Studies found that in 2018 the U.S. built about 260,000 fewer homes than it needed to keep up with population growth and an aging housing stock.
According to the Wall Street Journal the volume of existing-home sales on an annualized basis has fallen for 15 straight months. But the asking price of homes is still increasing at a rate that is faster than income growth. The price of a typical mid-range home is now 4.1 times median annual income, up from a low of 3.3 in 2011.
The shrinking buyer pool and the lack of affordable homes has helped fuel the demand for rentals, according to Calvin Schnure, economic analyst at the National Association of Real Estate Investment Trusts. “There’s a shortage of every type of housing,” he said, noting construction hasn’t kept pace with population growth.
Volume and price of rentals have reached new highs. Monthly rental prices nationwide shot up 3% from the second quarter of 2018 to the same period this year.
Some elected officials think it’s time to press the panic button. Minneapolis’s leaders think so, and the city has taken a drastic step: They have removed most single-family zoning. It is now legal for any owner to build up to four units on a typical residential lot. (Are you hyperventilating yet?)
Right now, it is illegal to build anything other than a detached single-family home on 75% of the land in many American cities. Some cities have been debating doing away with this limitation, but Minneapolis is the first to act. 70% of the city’s residential land is now zoned for up to four units on a buildable lot.
The hope is that if we allow multifamily housing on most residential lots, housing stock will explode, and housing costs will come down. In a world of NIMBY (Not in My Backyard) and BANANA (Build Absolutely Nothing Anywhere Near Anyone), I would have thought such a revolutionary change would be impossible. But there it is.
I actually think it’s a good idea. I grew up in a two-family house in Allston. My daughter now owns it. It’s a seven-bedroom house on a tenth of an acre. Most of its neighbors are apartment buildings. My grandfather paid $6,000 for it in 1941. Today, Zillow says it is worth $1.4 million.
Of course, the Cape is more rural than urban. We still have septic systems, not sewers. Many lots cannot accommodate multiple units. To make such a system work here, we might have to put in some treatment plants and sewer lines — perhaps running down main roads like 28, 130, 134, 124, 132, etc — and zone adjacent lands for multi-family buildings. We should do this anyway to reduce nitrogen loading in our estuaries and bays.
I confess that I would not be happy if such a law were passed and my neighbor announced that he was replacing his single-family home with a row of four townhouses he intended to rent out. But we have to be realistic. Is there a better, cheaper way to jump start residential construction? Keep your eyes on Minneapolis!