What’s the biggest cause of high housing costs in the nation?
Industry insiders answer that government bureaucracy slows or prevents the construction of new housing, compounded by the public’s “not-in-my-backyard” aversion to adding homes in their neighborhoods.
Well, one poll shows the typical American thinks the industry needs to look at itself, too. The Searchlight Institute’s recent poll of 2,123 U.S. adults on housing provides another perspective on the grand affordability debate.
Also see: Southern California home sales slump to another record low
There’s no argument about the scope of the financial burden, as 93% of those polled said housing was overly expensive – with 43% saying “way too high.”
But one question summed up the doubts about the industry’s contention that housing construction is the best cure for affordability.
The poll asked: “Do you believe that increasing the number of homes in your community will lower prices or raise prices?”
The results showed 44% of those polled saw development as raising prices vs. 24% seeing price declines.
Some industry insiders and policy wonks will say the public needs a few economics lessons. More supply should lower prices.
But what many Americans see is construction that focuses on higher-end residences. To those eyes, that’s increasing their local housing cost.
The industry is currently burdened with huge inventories of unsold new houses and empty new apartments, which are offered at what many see as inflated prices. Perhaps those selling homes and leasing rentals should rethink customer concerns about affordability.
Consider who Americans blamed when the poll sought rankings of affordability roadblocks. Look at what drew the most votes as examples of housing policy’s disconnect.
#1 Investors
The poll found 48% of Americans surveyed cited “investors are buying up housing to turn a profit” as a big cause of high housing costs.
Numerous industry insiders argue that investors are good for the market. Their cash provides liquidity, particularly as buyers when others won’t take the risk.
Critics say investor cash inflates prices above what many house hunters can afford, essentially squeezing out first-time buyers. Tax breaks for investors give them further advantages in the marketplace.
Another poll question details Americans’ unease with “institutional” house investors – a minor but controversial slice of the market.
When asked what would happen to home prices if banks or corporations were banned from homeownership, 36% of those polled said prices would decrease, vs. 22% who thought they’d rise.
#2 Construction costs
The poll found 46% of Americans surveyed cited “materials used to build homes are too expensive.”
It’s not clear if that’s criticism or a sympathetic answer.
Elsewhere in the results, you see that when asked about barriers to affordability, 67% of those polled cited the focus of landlords and developers on high-profit projects. That’s a dig at the industry’s luxury push.
But Americans polled also agree with industry beefs about the costs builders incur.
Note that 76% of those polled saw construction costs and financing requirements as an affordability barrier, 66% acknowledged the challenges of limited land and infrastructure, and 55% saw shortages of workers and materials as a problem.
#3 Landlords
The poll found 43% of Americans surveyed cited “landlords are raising rents faster than necessary.”
Costs for tenants have skyrocketed in recent years, and it appears the industry has work to do to explain its pricing and potential solutions.
Consider the popularity of two fixes: rent control, the industry’s bane, and what developers want: easy construction of more units.
When asked about the impact of tactics to improve affordability, both rent freezes/caps and friendlier apartment zoning received approval from 34% of those polled, seeing the moves as cost-cutters.
But 26% fear rising costs from pro-apartment policies – likely tied to upscale development.
Contrast that to the 19% who saw rent control increasing expenses. Pricing limits can make costs higher for tenants who live in non-regulated units.
#4 Politicians
The poll found that 33% of Americans surveyed cited that “elected officials do not prioritize policies to make housing more affordable.”
So Americans do sympathize with the industry’s battles to increase housing supply.
Government approvals and community input for projects were seen as an affordability barrier by 61% of those polled, vs. 21% who didn’t see a concern. And zoning and regulation were a barrier to 68% of those surveyed, vs. 17% who didn’t.
By the way, a new California law would limit community opposition to mid-rise apartment construction near transit hubs.
Additionally, Americans are OK with the industry’s wishes for streamlined project approvals. Faster permitting was popular: 65% approved vs. 17% disapproved.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com