Tuesday, October 1, 2024
I’ve been thinking about the shortage of housing supply and how deeply it impacts the quality and quantity of work in our lives. There are many facets of the kaleidoscope that make up the totality of the problem. But instead of throwing up our hands and letting cynicism take root as our default thinking system, I’m hoping we can instead use our knowledge, connections, and expertise to help influence and remedy as many elements as possible. For at least the time being and the near future, I’ve become a YIMBY.
NIMBY, for those who don’t know, is a residual term from the 1970s that was a shorthand for people who opposed certain kinds of development and land use in their communities. Often these people claimed to support growth and development as a concept, provided the projects were built somewhere else. The abbreviation stood for “not in my back yard”. NIMBYism has grown, morphed and become more sophisticated since then, and it’s one of the elements that led us to the current housing shortage. To break out of this current situation as quickly and efficiently as possible, more of us are going to need to use our expertise and influence to get rational building rolling again. We’re going to need to become YIMBYs and say, “yes in my back yard”.
In every presidential election year, I find myself listening intently for signals of each candidate’s housing plan. Frankly, this year I’m listening in even closer, given that earlier in 2024 the subject of title insurance and housing costs made an unprecedented guest appearance in the State of the Union address. I don’t want to be caught by surprise like that again.
Here’s what I’ve been able to surmise so far, as the candidates highlight their proposed solutions:
Vice President Harris’s plan includes – a middle-class tax cut, diminished red tape for new housing starts, a tax policy that discourages corporate landlords from purchasing single-family inventory, tax incentives for builders and developers to create entry level homes and neighborhoods, a goal of 3 million new homes built by 2028, $25,000 in first-time buyer downpayment assistance, and one would assume an immigration policy that would continue placing downward pricing pressures on the wages of workers who build the homes as well as the wages of the eventual buyers of the homes.
Former President Trump’s plan includes – incentivizing building in Opportunity Zones, opening federal lands for use in residential development, lower C-Corp tax rates, decreased bureaucratic red tape, bringing the GSEs out of conservatorship, influence over the Federal Reserve to lower interest rates sooner and keep them lower for longer, and a tariff and immigration policy that could negatively impact affordability.
Rest assured, if we were sharing a Friday evening glass of wine together, I could and likely would share a rant and/or ask you rather deep ripple-effect type questions for each and every one of the suggested initiatives listed above. I’m sure you and I would hold a plurality of ideas about each, and we could cuss and discuss until the early morning hours. Which, by the way, I would love to do with you. But that’s not my point in writing this.
Rather, as cogent thinkers and active stakeholders in this market, who often have a rich and complex set of viewpoints based on our experience … I’m instead urging us to get in the game. I don’t need you to have the same opinions as I have on any of these. Some ideas are good, some are hairbrained and some are well intentioned but just aren’t based in reality. Which is exactly my point. Because we’ve been doing this for more than five minutes, I’m sure we would agree that solutions are going to have to be hyper-local and tailored if they’re going to succeed. At least when we’re talking about the supply side of the equation. What will work well to break the logjam in San Diego, Calif., will be quite different than a solution focusing on the unique issues in Wichita, Kan. And New York, well, good luck! I kid New York, but just by thinking about those three examples in the micro starts to shape a mind around how customizable and flexible any viable portfolio of options will have to be.
If either or both of the candidate’s plans that we’ve seen so far feel a bit misguided or jumbled, it might be because we haven’t yet decided if embarking on a path to building and maximizing generational wealth is our primary goal, or if housing affordability right now is our top priority. As we all know, incenting our way out of the supply problem and tackling the affordability problem each have some hazards for the other. Merely helping solve for affordability with downpayment assistance, for example, will push prices higher in an inventory deprived market. Yet, anyone who already owns a home will take an equity hit if we slow price appreciation by creating significantly greater supply.
In addition to highly tailored solutions for each local market, the timing and sequencing of affordability solutions vis-a-vis the supply solutions will prove critical. There is no one size fits all solution that I can find. The two people auditioning to be our leaders haven’t found a silver bullet, either.
Which is actually good news. Because it means these things are actively being figured out right now. And they need us to bring our perspectives to the table. Are you engaged with your local homebuilders in a meaningful way? How about your local zoning board meetings and your city or county council meetings … are you on loan as a subject matter expert for them? Could you build an advisory group made up of industry professionals from all aspects of the supply chain including developers, appraisers, builders, lenders, realtors, community advocates, title and settlement; even the school board has something to say about housing in the community. It’s these hyper-local coalitions that can help make the difference between someone’s hairbrained idea making the problem worse in your market, or an effective plan that can be proactively worked in order to achieve the outcomes we’re all looking for.
It’s tempting to simply throw rotten vegetables at your television when leaders cite prescriptions for remedies you know will backfire given the circumstances in your back yard. Granted, there’s a weird satisfaction in sighing because too few people understand the delicate balance of supply and demand as it relates to our highest ideals of what the American Dream still means. But it is also a hollow feeling and it’s far less satisfying than rolling up your sleeves, engaging with other interested parties, and helping craft solutions that will make a positive impact.
Let’s get to work.
Until Next Time,
Mary Schuster
Chief Knowledge Officer
October Research, LLC