As real estate professionals from around the world gathered to discuss the state of the housing market at the National Association of Realtors’ largest annual meeting, one issue reigned supreme among the list of challenges: How to provide more places to live.
Adding houses should theoretically make it harder for buyers to bid up prices by allowing supply to meet demand. But over the course of the three-day NAR NXT conference in Boston, panelists, speakers and attendees agreed this is easier said than done.
“At the end of the day, if it was that easy we probably wouldn’t be facing the incredible housing shortage that we currently have,” Kathleen Heyer, an associate at law firm Pierce Atwood, said during a panel discussion.
The United States faces a historic undersupply of housing, with analysts and economists estimating the country is short between 1.5 million and 5.5 million of the homes needed. It’s an issue that’s gone hand-in-hand with worsening housing affordability and pushed the dream of homeownership out of reach for many.
Here are three suggestions from the real estate leaders and attendees to increase housing supply in the United States.
1) Build in bulk
One way to increase the production of housing, and in turn the supply, is to change how developers build homes.
“It’s not working the way we’re doing it,” Heyer said.
After the 1970s, builders in the U.S. “started getting smaller,” according to Edward Glaeser, an economics professor at Harvard University and a panelist at NAR NXT. Now, the building industry is “an industry that’s dominated by these tiny firms who don’t have technology operations, who don’t patent the way they used to,” he said during a panel.
That’s hampered homebuilding and limited the kinds of homes that developers can build. Instead, Glaeser suggested that builders look to “mass scale” production, a move that could, for example, up their production of manufactured houses.
From the Homes.com blog: What You Need to Know About Buying a Manufactured Home
It’s a business model that’s already taken hold in some areas of the country where less red tape and regulation exist, Glaeser said. In other places, though, achieving that business model would mean contending with higher costs and potential pushback from residents.
2) Invest in vocational training
Another way to ramp up housing production is to invest in the workforce responsible for homebuilding.
The U.S. is on the brink of a labor quandary amid a growing mismatch between the number of skilled trade workers aging out of the workforce and the number of younger people entering the trades. The decline in trade workers comes as the demand in the labor force is set to expand, according to a report from consulting firm McKinsey & Co. from earlier this year.
And the mismatch between labor supply and housing demand has created costly slowdowns in the homebuilding industry. Analysts, economists and legislators have called out the issue, arguing that the shortage of labor has hampered production.
"With fewer skilled workers available, construction can take longer, driving costs up and making it harder to keep homes priced affordably," Sen. Jacky Rosen from Nevada said in a statement in September. "It is simply too expensive to build affordable housing in this high-cost environment, and a shortage of construction workers contributes significantly to those rising costs.”
That's why bringing younger workers into the labor force is critical to ensure housing production can meet the country’s needs, according to Phil Crone, vice president of Leading Builders of America. One way to do that is making changes to the education system, he said.
Moving “away from a model where school administrators define success by who they see in the mirror every morning" would be a good step, Crone said during a panel discussion at the show.
“That means shifting back to shop classes,” he said. “Shifting away from standardized tests that focus on making kids mediocre at what they’re not interested in, instead of what they are interested in. That’s, I think, a big way to get us rolling back as a housing industry.”
3) Local engagement
Though real estate leaders put forth different ideas for easing the housing shortage, almost all of them included one strategy in their proposals: community engagement to combat NIMBYism.
The not in my backyard, or NIMBY, movement centered on residents generally opposing development in their communities. It’s one of the biggest threats to local legislation that can increase housing production, and movement members often make up a majority of the attendees at local government meetings where such legislation is discussed.
“Every town is sure that theirs is the best place to live, and it’s special and unique, and it needs to be preserved as such,” Heyer of Pierce Atwood said. “The bogeyman of more housing, it triggers something so passionate in people.”
Because of that, the need for housing advocates to participate at the local level “is so important,” according to Tamara Small, the CEO of the Massachusetts chapter of NAIOP, the Commercial Real Estate Development Association.
“We need to have small business owners," Small said during a panel discussion. "We need to have long-time residents, old and young, come together and really say ‘We can do this together.’”
Some panelists pointed out that being a voice against NIMBYism can be difficult. So, they suggested creating coalitions of housing advocates within the community or taking an alternative approach, such as supporting local politicians who are pro-housing.
Ultimately, though, participation to some degree is necessary to bolster the housing supply, according to Tom Truong, an agent and coach with eXp Realty.
“It all boils down to local engagement,” he said.