Homebuilding Isn’t Keeping Up With Growth, Development Group Says

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Construction workers frame a new home at a Woodside Homes site in Saratoga Springs, Utah, in May 2017. Utah is among the 22 states that built too little housing in the 15 years since 2000.

Kim Raff for The Wall Street Journal

America’s housing shortage is more wide-ranging than cloistered coastal markets, stretching from pricey locales such as California and Massachusetts to more surprising places, such as Arizona and Utah.

Some 22 states and the District of Columbia have built too little housing to keep up with economic growth in the 15 years since 2000, resulting in a total shortage of 7.3 million units, according to research to be released Monday by an advocacy group for loosening building regulations.

California bears half of the blame for the shortage: The state built 3.4 million too few units to keep up with job, population and income growth.

The research was commissioned by Up for Growth National Coalition, a newly formed group that includes real-estate developers and owners such as Holland Property Group in Vancouver, Wash., and Essex Property Trust Inc. in California, along with affordable-housing builder BRIDGE Housing. It also includes local California chambers of commerce and TechNet, a network of technology-company executives.

The data adds details to a housing-shortage picture painted by government data, industry results and economists. Home construction per household remains near the lowest level in 60 years of record-keeping, according to Jordan Rappaport, an economist at the Federal Reserve Bank of Kansas City.

There is growing awareness that the housing shortage is widespread and it affects states not often thought of as being especially anti-development. Home prices nationally rose 6.2% in the year that ended in January, roughly twice the rate of incomes and three times the rate of inflation, according to the S&P CoreLogic Case-Shiller National Home Price Index.

“The artificial barriers to housing production aren’t constrained just to California,” said Mike Kingsella, executive director of the Up For Growth National Coalition. “As we dug into the numbers behind this, at a local market level, we’re seeing a pronounced affordability challenge in places like even Arizona.”

Arizona and Utah are among the states that have built too little housing in the 15-year period, according to the report. The shortage in these places likely reflects strong demand as they become top destinations for retirees and people priced out of the Northeast and California.

At the same time, it is becoming more difficult to build all across America due to shortages of land, labor and materials.

Southern Nevada has about a two months’ supply of homes for sale at the current sales pace, when about six months is considered a balanced market between sellers and buyers. Las Vegas saw home prices rise 11% in the year ended January, making it the second-fastest growing market for home prices in the country, according to Case-Shiller.

Las Vegas has historically swung from extreme home-building binges to severe busts, but a decade after the housing crash it looks more like the rest of the country. Builders have been more cautious about putting up new homes, and the economy has become more diverse.

“We have home builders that are building like crazy trying to keep up with demand, and they can’t build fast enough,” said Chris Bishop, president of the Greater Las Vegas Association of Realtors, which isn’t part of the advocacy group.

Developers who are part of the Up for Growth coalition have a vested interest in advocating for loosening planning regulations; they stand to make money from increased housing production.

The Up for Growth report, conducted by ECONorthwest, an economic consulting firm, examines how much housing was built in the U.S. compared with economic drivers of housing demand, such as home prices, population growth and incomes. It compares production from 2000 to 2015 with rates of production since the 1970s.

Economists who have reviewed the report caution that measuring the present need for housing by extrapolating from past production is imperfect. Western states that were sparsely populated 60 years ago and experienced huge building booms in the latter half of the 20th century may not need to build at such a rapid clip today.

Housing shortages also are difficult to measure because most people will find somewhere to live by doubling up with family or roommates or moving to areas where homes are abundant but jobs may be scarce.

Nonetheless, the data underscore what economists say is a clear trend. “We have a housing deficit,” said Chris Herbert, managing director at Harvard University’s Joint Center for Housing Studies. “I think we can all agree we should be building more.”

The Phoenix metropolitan area has about three months of supply at the current sales pace. Prices rose 5.9% in the year ended January, according to Case-Shiller. In Boise, Idaho, buyers are reporting bidding wars and some are paying in cash, a new phenomenon for what was once a sleepy market.

California has environmental and other regulations that can add years and tens of thousands of dollars to development costs. That has collided with a booming technology sector to help the median price of a home in the state more than double to nearly $540,000 since 2000.

Most recently, California state Sen. Scott Wiener proposed allowing developers to build taller buildings near public transit even if local zoning doesn’t permit it, in an effort to promote more housing near transportation.

“California is certainly the poster child of what happens when you don’t build enough housing and when you don’t fund enough affordable housing,” the Democrat said. ”It’s going to take years and frankly decades to truly resolve the problem.”

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