Odd New Housing Obstacles in the U.S.

Andrew Gast-Bray, Ph.D., AICP, CNU 

Planning Director - Monongalia County Planning Commission, WV, USA

December 4, 2023

The housing crisis is an international problem.  Many of the obstacles are widespread – access to materials and appropriate locations.  However, in addition to these, the US presents a number of peculiar factors or peculiar aspects to the same challenges felt worldwide.  These can be found in the following areas:

• Lack of housing capacity – {i.e. not enough housing and dwelling units are being built}

• Availability of housing options – {i.e. choices of the kinds of housing available are severely limited}

• Availability of housing in accessible locations – {i.e. the limited housing that IS available is not available in locations that people need or want, and, even if it is, usually it requires long car rides limiting its utility for those who don’t want to drive, cannot drive, or should not drive, often in such a way as to add a great cost burden because it does not have safe (and/or affordable) alternative transportation choices like transit, biking, and walking.}

• Planning and Code Obstacles – {e.g. parking regulations, design standards, building codes}

• Cost of housing – {i.e. adding to the above, material costs and location costs due to normal market forces}

• Finances of Housing – {i.e. home and building financing, assessing and the taxes associated}

• Affordability and workforce housing – {the above components then severely limit housing and consequently drive up the costs (where it is available or needed) to the point where it is no longer affordable to the majority of citizens}

Each of these components has reasons and/or obstacles that have hindered normal market and governmental forces from overcoming them in order to provide a sufficient amount of housing to resolve the current shortfall.

Lack of housing capacity – Due to high costs of entry, narrow margins, a great deal of residual, but substandard stock, builders are not building a lot of new stock.  Lack of available/buildable land and neighborhood fear of ‘tall’ buildings and/or affordable housing also prevent new stock from being built or expanded in capacity.  Inaccurate traffic and parking assessments externalize traffic conditions (see below), while precluding new stock and/or additional stock from being built (especially in good locations). 

Availability of housing options – The same causes as above drive developers to produce a one–size–fits–none–commodity approach rather than have a nuanced set of housing that risks having no takers.  Thus, the market is overwhelmingly single-family detached (SFD) housing or apartments, occasionally with townhomes thrown in for good measure.  Bungalow courts, courtyard apartments, garden apartments, low-rise apartments, and many other traditional housing patterns are not built (cf. mixed-middle housing).  Furthermore, when apartments are built, THEY are limited to one-size-fits-none, cookie-cutter 2-bedroom apartments. Forcing more of the market to compete by buying fewer choices drives up the price of housing further.

Availability of housing in accessible locations – The affordability index from the Center for Neighborhood Technology (CNT) describes true affordability as housing PLUS transportation costs.  Teachers, Police, and other workforce-income people often have to locate counties away to find any housing that they can afford, and without access to alternative modes of transport.  So, this makes the transportation costs rise to the point that the housing costs are offset by the increased transportation costs, quite apart from the quality-of-life issues associated with long commute times.  Furthermore, forcing long-distance commutes dramatically extends the amount of infrastructure needed per dweller and clogs the existing road infrastructure, worsening the situation. By sprawling outward in a ‘drive till you qualify’ trajectory, the amount of infrastructure increases exponentially in an environment where governments cannot afford to maintain the existing infrastructure.  Furthermore, this requires more parking to accommodate everyone driving to each and every destination, making matters worse.  Vuchic has observed that it now takes a building and a half of parking for every building we build.  Requiring structured parking aggravates dramatically the cost of housing per dweller, but so does building surface parking in terms of driving up land costs, forcing larger assemblages of land to meet the requirements, in areas where land is already scarce.

Planning and Code Obstacles – Furthermore, government limitations/constraints, when it comes to infill near existing infrastructure, often impede rather than encourage infill. Due to Housing Policy (and often due to code requirements {e.g. building codes, height restrictions, housing type restrictions…}, infill is often precluded or at least it raises costs for the types of building that housing and planning advocates are trying to encourage.  More complex and conditional regulations (e.g. PUDs) add time or stymie actual infill applications.  More flexible housing requirements may be countermanded by insensitive parking regulations.  The National Town Builders Association has demonstrated that innumerable planning codes across the US prevent the targeted type of development, exclusively due to ‘being unable to park it’, i.e. resulting from their own parking requirements. Public processes often allow under-informed neighborhoods to resist any efforts to change or fix an area, etc. (cf. exclusionary zoning, NIMBYism). Negative perceptions of affordability chase away development altogether. NIMBYs may ‘weaponize’ planning codes and rules to preclude or delay infill.  Finally, even if allowed, all these factors extend the time for review, adding to the time and holding costs, making infill housing provision unaffordable. These can lead to financial challenges for housing (see below).  

Cost of housing – the physical cost of materials has increased dramatically since COVID-19.  The timelines to receive the materials themselves (i.e., even if everything is approved) have also increased dramatically, increasing delays and holding costs apart from the cost of the materials.  New requirements for what is allowed for building materials OR what must be remediated in renovations have also increased the physical costs of building nearly two-fold, regardless of the land costs.  Demand for the land, independent of all these other factors – simply due to the shortage of housing leads market forces to raise prices all by themselves.

Even if one could afford the building itself, to find a developable land assemblage near existing infrastructure, it takes time to do so. Land-banking (e.g. holding onto property to wait for its value to rise) removes a lot of possible land leading to real estate bidding and agglomeration economies can price it out of the market.  Putting housing in existing areas is often labeled either as gentrification or loss of property value, depending on the perception (especially as the housing is usually a mono-species, rather than a range), the controversy further limiting or slowing the process of adding capacity or increasing the cost of the capacity added. 

Finances of housing – Mixed middle housing in areas with appropriate infrastructure would be the logical place for affordable and workforce housing.  However, there are a surprising number of financing obstacles that impede the viability of this needed form and location of housing.  Providing housing above ground-floor retail seems another logical step.  However, FHA-backed loans seem to preclude ownership in many traditional mixed-use ownership arrangements.  Since the Great Recession, the FHA also no longer backs condominium loans, requiring instead private financing, increasing costs.  Apparently, the chance of the retail owner OR the condo/apartment owner being insolvent risks putting the whole building's financial viability in question if the ownership is above a certain percentage. This is avoided if there is ‘one’ owner or ‘many’ such that the viability of the building is directly attributable either to the ‘one’ OR if any other owner goes under, it does not take the rest of the building finances with it.  

Furthermore, land valuation, the basis for assessments/taxes, is peculiar.  An owner can sell a lot in a good location for an exorbitant price, while land-banking the lot for parking (see above) and only be taxed at the value of the asphalt for the lot.  This leads to a lot of speculation for land assemblages large enough to meet requirements, etc. (cf. 1.5 buildings of parking for every building described above). All the factors listed above also lead to delays that increase holding costs dramatically for developers – and as mentioned, they can barely profit at best with the limitations (e.g. parking requirements, etc.).  Furthermore, many of the bonds and letters of credit required to guarantee the development are getting increasingly expensive and are required for longer times with all the delays, exacerbating the problem.

Affordability and workforce housing – Requirements to provide decent housing and the labor to produce it increase the costs of housing.  If anything is desired other than a cookie-cutter apartment or a SFD home in a not particularly accessible location, one is likely to pay a premium.  The lack of options and housing overall has raised prices out of the market for those who need affordable or workforce housing.  Competition for housing in good locations makes those locations unaffordable.  Lack of quality infill misses the opportunity to get more units in infill areas raising prices in those areas as well.  Costliness to rehab buildings at these locations with new regulations and building codes render rehabilitateable structures rare and expensive (e.g. firewalls, accessibility requirements, ventilation requirements through old structural walls, Davis-Bacon labor rates, etc.); cost is many times what is affordable.  Basically, requirements for affordable housing make the provision of affordable housing anything but affordable, which in turn requires subsidies from strapped governments just to provide the needed housing, but then those strapped governments will lose money in exchange, and they will struggle with maintaining that affordable housing over time.

Some possible solutions

Some of the more accessible solutions include the provision of mixed middle housing where infrastructure exists;  reduced parking requirements; integrating transportation into affordable housing policies; expedited and enabled review of infill housing; and Land-Value Taxes (cf. Pennsylvania, Detroit,..) to reduce the appeal of land-banking; and fiscal incentives including FHA-backed loans for non-SFD housing.

Another possible tool in resolving a portion of the crisis is the Snailbox/Snailnest project, which seeks a technological system to address all of the facets of the housing problem.  Basically, a Snailbox is a modular, concatenable, transportable/movable condo that resides in a context-sensitive adaptable, modifiable host building called a Snailnest.  The system is adapted to infill.

Regardless, any solution to the housing crisis will require an integrated approach, ranging from more affordable physical buildings to more integrated transportation/housing options to more streamlined, flexible, and adaptable public/planning/housing policies to more affordable financing mechanisms.  Any one of these items and/or related approaches will not succeed, however, unless we address the housing issue complexity as a whole.