How Can Home Builders Tackle Inventory Issues?

Shifts in thinking are welcome, but they're long overdue—and not aggressive enough

May 31, 2018
New home inventory

This month’s cover story on regional builders highlights the successes of local builders around the country, but also some of the difficulties they face. One of the most intransigent problems involves getting enough new residential construction on the ground. As senior editor John Caulfield writes in "Pride of Place," “… sales of single-family homes in Greater Boston unexpectedly dipped by 11.7 percent to around 30,170 units, the steepest percentage decline since the Great Recession. Condo sales were off by 4.1 percent to 18,134 ... The administration of Boston Mayor Martin Walsh has committed to build 53,000 units of housing by 2030. That construction can’t be completed soon enough for a market that ended last year with a paltry 2.1 months of housing inventory.”

The dearth of inventory is occurring in the supply of both new and existing homes. In April, research from Realtor.com shows that overall, existing home inventory has decreased for 42 consecutive months and 8.5 percent from the previous year alone. The site’s chief economist, Danielle Hale, says, “I think it’s fair to say this is the most competitive housing market we’ve seen in recorded history. There’s record low inventory and strong interest from buyers in getting into the housing market. There are a lot of buyers, and not a lot of sellers.” National Association of Realtors’ chief economist and SVP of research Lawrence Yun concurred, adding, “Realtors in areas with strong job markets report that consumer frustration is rising. Home shoppers are increasingly struggling to find an affordable property to buy, and the prevalence of multiple bids is pushing prices further out of reach.” (Image: Michael Gaida via Pixabay)

It appears that the perfect storm of increasing household formations, decreasing housing affordability, and just plain old not enough places to live is forcing some cities and counties to try to come up with solutions on their own. One of these solutions is fairly surprising: After years of outlawing, denying permits, and demolishing those built surreptitiously, government officials in areas as disparate as Boston and Sonoma County, Calif., have begun encouraging the building of homes in backyards. 

In May, a 360-square-foot dwelling called the Plugin House was built alongside Boston’s City Hall. Assembled might be a better description because the house consists of panels that already contain its insulation and openings for plumbing, electrical, and ductwork, and was put together in about five hours by volunteers using hex wrenches. The house, designed by Harvard University fellow James Shen, is part of an effort by Mayor Walsh’s Housing Innovation Lab to introduce new ideas for housing to Boston’s citizens. The month before, the city initiated a pilot program that allows homeowners in certain areas to build accessory dwelling units (ADUs) on their property to see what their impact might be. The weeklong Plugin House exhibit was an open invitation to residents to consider building their own ADUs.

Sonoma County, on the other hand, is moving more quickly to encourage the construction of new homes, including ADUs, in an attempt to replace the nearly 5,300 homes destroyed in last year’s wildfires. According to the North Bay Business Journal, it took seven years, from 2011 to 2018, to build that many homes under normal circumstances, so county supervisors last month loosened restrictions and lowered permitting and zoning hurdles to allow more—and larger—ADUs, along with other types of development that could add to the housing stock. The county’s tentative goal is to create 30,000 additional units over the next five years, and additional initiatives will be enacted to try to accomplish that objective. 

These shifts in thinking are welcome, but are long overdue and not aggressive enough, especially in California. The state currently ranks 49th in the nation for housing per capita, and its policies, as the government itself says, have caused its residents to “overpay, overcommute, and overcrowd.” 

editorial director

Denise Dersin, editorial director of Professional Builder, Custom Builder, PRODUCTS, NKBA Innovation+Inspiration, and co-editor of Multifamily Design+Construction, has been in publishing as an editor and writer for 30 years and has worked in the housing industry for much of that time.

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PB-New Home Sales,PB-New Home Marketing,PB-Innovations,PB-Modular homes
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