I had originally intended for this post to be more detailed but I’ll just limit myself to a few basic observations.
During the Biden Administration the U. S. population increased by between 5.5 and 7 million people. That includes the “natural increase” of about 1.5 million + people admitted to the U. S. with legal visas + people seeking asylum + people apprehended at the border and released into the country. During the same period the number of housing units increased by about 4 million. Most of those statistics are from the Census Bureau, HUD, and the Department of Homeland Security.
Under the circumstances all else equal you would expect the price of housing to increase.
Unfortunately, all else was not equal and the price of housing increased a lot, by most accounts between 25% and 30% over that period. A number of factors could explain that including inflation, increased taxes, pent up demand (following the COVID lockdowns), and a tendency by builders to build larger homes. We can see that right in my neighborhood. A small, nondescript house a block from here was upgraded to a large, ugly sore thumb of a McMansion. The house that the developers bought for $500,000 is now being sold at an asking price of $1.25 million. We’ll see how long it takes to sell. In this neighborhood the time between initial listing and sale tends to be extremely small, occasionally just hours (like the house I’m sitting in).
Clearly, there is a mismatch in public policy. Either the population needs to increase more slowly or more houses need to be built more quickly. And those new housing units need to be places that people can afford to live in.
I’ve already expressed my preference: I think we need to limit immigration to those with skills plus a small number of asylum seekers (using the legal definition of “asylum” from the Immigration and Naturalization Act). And those admitted should not merely be replacing workers already in the country at a lower cost as has too frequently been the case over the last 30 years.
The irony, of course, is that the mismatch is greatest in places that have designated themselves as “sanctuary cities”.
Housing prices have increased because the Fed kept interest rates near 0% for the last 20, and this allowed prices to rise. The other factor is Airbnb. Short term rentals generate much, much more income.
Thank you for bringing up interest rates. Yes, that was a contributing factor as well. I’ll see if I can quantify the effect that AirBnb has had on reducing the stock of affordable housing.
So far what I’ve uncovered is that there’s an effect but not a big one. A study from a few years ago found that for each 1% increase in AirBnb listings there was a a 0.018% increase in rents and a 0.026% increase in house prices in U.S. cities.
For Airbnb specifically, limit the analysis to higher priced houses, but not extraordinary prices. It is unlikely that people are going to rent in an undesirable area, and likewise, they cannot afford anything too expensive. Also, it should use hotel data – room rates, hotels built, etc. I assume condominiums are included in your analysis.
I could be wrong, but I suspect it is fairly complex. @Drew should have more insight than I.
We need more housing but it’s mostly in specific areas. Most of it is due to poor policy and NIMBYism. Where I live we have little regulation on housing. I had a contractor actually laugh when I asked if I needed to get a permit for some work not long after we built our house. We have since added some regs but it’s still easy to build. Hence, in less than 5 minutes I can drive to 3 new housing developments going up. A couple more just completed.
The timing does not match up that well for immigration causing the housing cost increase. It’s more that we have had a chronic lack of building enough houses coupled with very low interest rates and people hitting the right age group to start households.
https://www.jchs.harvard.edu/blog/role-recent-immigrant-surge-housing-costs
Steve
Clearly, you don’t live in Chicago. If you start doing any remodeling here without a city permit, the city comes along pretty quickly and cites you.
You still haven’t explained how we can increase the population by five million, increase the number of housing units by four million, and NOT increase the price of housing.
I would add that various PE firms buying up property is a problem. They can outbid anyone in an existing neighborhood (and often do here in Florida) and sometimes they just buy entire housing developments as they’re built. My wife and I were driving around in the summer of 2024 and found a new neighborhood being built up in Apopka. Largish homes for the area (over 2200+ sf iirc), dozens and dozens of units, and one of the PE companies had bought the entire neighborhood for rentals.
That can never be a true neighborhood. Snd the houses were going to be rented out only to ppl making six figures. Again, these were detached units, not townhomes or apartment buildings. Awful to see.
You’re in Florida aren’t you, Icepick? That’s probably a bigger problem for you than it is for us here in Chicago.
My researches indicate that there are about a quarter million private equity-owned single family homes in the U. S. Half of those are in Florida.