The Evolution Of The American Housing Crisis

0:28This message comes from KeyBank. people in the U.S. And the problem is national. The median price for a home in the U.S. is now just over$400 ,000. A house now costs five years of the median salary for someone working in the U.S. In some cities on the West Coast and in parts of Florida, it now takes eight years of salary to buy a home. Rents have also gone up significantly. Since 2020, the nation's average rent is 27 percent higher. Some cities have seen much bigger jumps. Miami's average rent is up 51 percent. Some cities have seen recent declines, but overall, the cost of rent remains elevated.

1:06Housing advocates point to one big cause. The United States has not built enough housing for a growing population, but build more housing is not a simple remedy to a complex problem. Congress recently turned its attention to the problem of housing unaffordability. The Senate passed a bill this month with a basket of different policies aiming to bring down the cost of housing and encourage more building. So what's in the bills specifically and could those policies make a dent in the housing crisis? And how has the housing crisis evolved in the past few years? I'm Jen White. You're listening to the 1A Podcast.

1:40We look at those questions and more right after a short break. Stay with us.

1:48This message comes from Babbel. Babbel's conversation-based language technique teaches you useful words and phrases to get you speaking quickly about the things you actually talk about in the real world. With lessons handcrafted by over 200 language experts and voiced by real native speakers, start speaking with Babbel today. Get up to 55 % off your Babbel subscription right now at babbel.com slash NPR, spelled B-A-B-B-E-L dot com slash NPR. Rules and restrictions may apply. Let's get into the conversation and meet our guests. Joining us from New York City is Rhonda Kaysen. She's a real estate reporter at the New York Times.

2:29Rhonda, welcome to the program. Hi, thank you so much for having me. And joining us from Oakland, California is David Garcia. He's the Deputy Director of Policy at the Turner Center for Housing Innovation. That's an organization at the University of California, Berkeley, that researches housing issues and develops policies to address housing affordability. David, welcome back to the program. Hi, thank you so much. So the Senate passed the 21st Century Road to Housing Act on March 12th, and it's the latest in a series of housing bills that committees in the House and Senate have considered separately since 2024.

3:03The latest version out of the Senate includes policies from earlier versions in both the House and the Senate. So we'll refer to the version passed on March 12th as the Senate bill for this discussion. We'll also link to it on our website, the1a.org. David, what stands out to you in the Senate bill? What would it do for housing in the U.S.? Yeah, well, first of all, it's a large bill. It's over 300 pages total, made up of dozens of provisions that individually seem small and technical in nature, but together could make a meaningful difference in housing supply and affordability. So there are changes to federal regulations and programs to promote more housing more efficiently through cutting red tape at the national level.

3:49There are expansions and creations of pilot programs to preserve existing housing by public housing authorities and private owners and in rural areas. It makes permanent a program to provide funding after disasters. And it also creates new incentives and potentially penalties for cities that don't build enough housing if they are a high-cost area. And we'll get into more specifics in a bit. But, Rhonda, what do we know about how these policies are likely to affect housing prices and rent prices? Well, I don't know if any of them will immediately have a very immediate effect. There are some rental assistance programs and there are some programs in there that will also make it easier for some people to borrow money, which may have some short-term effect.

4:34We could see new housing, though, happen really in the next year. For example, there's a lot of emphasis on expanding manufactured housing and what is manufactured housing. And so these changes will make it easier to build more modular and manufactured housing in infill areas, in vacant lots. And that housing can be built very, very quickly because it's factory built. And by sort of broadening the definition of what is a manufactured house, the factories are better able to build more housing. And you could start seeing those homes come in quickly and they're cheaper. And they can take maybe six weeks to six months versus 18 months for a stick frame home.

5:21David, how much flexibility does the Senate bill give cities or individual communities around what type of housing they build? Not every type of housing works for every community. Yeah. Yeah, so the Senate version and a similar version considered in the House, they both have different provisions that try to promote zoning and regulation changes at the local level to try and promote more home building in those places. I think they both try to strike a balance of not being too prescriptive in what cities can and can't do, but create a series of incentives and technical assistance to try and get cities on their own terms to change their own rules and policies so that they can actually build enough supply to get homes built.

6:07Well, President Trump addressed housing policy in his speech earlier this year at the World Economic Forum in Davos, mentioning institutional investors specifically. You buy a corporation, they buy 500 houses. They buy hundreds of thousands. They buy 500 houses. They can take depreciation. A person sweats and works and buys one house, they can't. But homes are built for people, not for corporations. And America will not become a nation of renters. We're not going to do that. So Rhonda, what is an institutional investor? Explain that a bit more. So an institutional investor is either, sometimes it's a pension fund and sometimes it's private equity.

6:50It's basically the money for building and that builders tap these investors, these private investors to buy homes. This sort of investment strategy gained a lot of attention and started really in the wake of the 2008 housing crisis when there was this huge foreclosure crisis. and Blackstone Group was the most notable, bought a number of foreclosed homes all around the country and converted them into rentals, single-family rentals. And this was initially, you know, filled this huge gap. But as housing supply depleted and the housing market improved, Americans found themselves competing with all-cash investor buyers who come in and they have a much better deal, you know, much better offer on the table than you do.

7:38They really make up a very small segment of the housing market, but they've gotten a lot of attention. But where this bill has gotten some pushback is because it includes a provision that limits build to rent. So there's this whole new segment of the housing market where entire neighborhoods are built as single family rentals. And this bill will limit those, will say if you own more than 350 units, you have to sell them after seven years. And so home builders are pushing back at this point and saying, well, this will stall out, which is actually one of the more active segments of the building environment.

8:15So like of all the single family homes that are built, about 7 % are now built exclusively as rentals, according to the National Association of Home Builders. Well, David, when I think about what the president said there in that clip, there's an assumption that Americans want to own homes. Take us inside the consumer side of this equation for a moment. Has the expectation or desire to own housing, has it shifted at all? Not really. I think by and large, most people do aspire to home ownership. I think the difference is there has been a bit of a shift in where they have opportunities for homeownership.

9:00So for a long time, we've only been building more suburban, single-family, detached-style housing, and those houses have become larger and larger as years have gone on. And so we've really stopped building smaller starter homes or condos or townhomes. And so there's just not as many opportunities to buy a new product that is kind of small and fits their needs at the moment. And this is where the bill to rent gets really interesting because while people would like to live in a single family home type, they maybe don't necessarily have the money for a down payment or don't have access to credit.

9:40And so Built to Rent oftentimes offers these families the opportunity to live in a single-family neighborhood, in a single-family home, without the significant commitment of getting a mortgage and buying a home. So it's not just about the amount of housing stock. It's having the right type of housing stock to meet the market. We heard from Jim in Omaha, who emails, My two adult single children are both spending$1 ,400 per month for rent for one-bedroom apartments in Omaha. There's no way they could ever afford to buy a house unless I pay their down payment. Now, while home prices are up 38 % in the past decade, rent has also gone up, especially in 2022 and 2023.

10:18David, how did the crisis around the cost of home prices and rent get so bad? Yeah, so there's a lot of reasons why we are kind of in the crisis we are in now. But it really boils down to the fact that we simply haven't built enough housing over a series of a number of decades. And so if you go back to, say, the 70s and 80s, the United States was building a lot more housing than it did today. And it also built more of a balance between multifamily and single family. Fast forward to today and most recent years, especially after the Great Recession, home building has not really recovered. and the home building that we do see is not always in the places where the demand is highest.

11:01We see a lot of building in, let's say, Sunbelt communities that are growing faster and the demand is there, but in a lot of coastal areas like California or New York, the pace of home building really lags behind historic trends. We heard from Nomi and Lafayette who writes, even here in Indiana, housing prices are crazy high, but all the apartments being built are in the luxury category, not what we need. The state must require that a portion of every development be set aside for affordable housing and that it stays affordable throughout its lifetime. Developers focused solely on making money will not do this on their own.

11:39Well, coming up after this short break, we hear from a local politician in Austin about how that city changed its housing market.

11:49This message comes from Babbel. Babbel's conversation-based language technique, teaches you useful words and phrases to get you speaking quickly about the things you actually talk about in the real world. With lessons handcrafted by over 200 language experts and voiced by real native speakers, start speaking with Babbel today. Get up to 55 % off your Babbel subscription right now at babbel.com slash NPR, spelled B-A-B-B-E-L dot com slash NPR. rules and restrictions may apply. Today, we're talking about the U.S. housing market and efforts by Congress to find federal solutions to housing affordability.

12:30Now, let's get back into it by hearing from someone on the ground in one of the most dynamic housing markets in the country. Chito Vela is the mayor pro tem for the City Council of Austin, Texas. He's also a council member representing District 4 in North Austin. Council Member Vela, welcome to 1A. Pleasure to be with you. Now, Councilmember Vela, your city has experienced a dramatic swing in the price of homes and rents over the past decade. Recent data from Pew shows rent in Austin jumped about 93 percent through the 2010s. Home sale prices jumped 82 percent in that same period. But then the pandemic hit, and like a lot of U.S.

13:05cities, home prices jumped even more, another 72 percent between March 2020 and June 2022. But at the same time, Austin built three times more housing in the past decade than the national average. So tell us about the policies Austin's local government put in place that had the clearest effect on increasing housing supply. Yeah, well, the first thing that you do is you approve housing projects that come before the council. The Austin City Council, over the handful of election cycles, became more pro-housing and simply started approving projects that might have gotten hung up in the past. But in addition to that, we made some important zoning changes.

13:46we had this one rule called a compatibility rule, which compatibility is essentially a force field that a single family home casts around it, reducing everything around it in height. It actually expanded out 540 feet and it was turning three-story apartments into two-story apartments, four-story apartment buildings into three-story. It was just reducing a lot of the housing. We changed that rule to it's just a 75-foot compatibility limit, and that has added a lot of new housing that has allowed for a lot of new housing. What was the public response to that change? You know, it's funny because that was, for a long time, kind of a holy grail of Austin housing politics.

14:34compatibility was kind of the jewel in the crown of the kind of the nimby political side here in Austin. And there was this idea that it was untouchable. But as you noted in the intro, the housing prices had gotten so bad. It was just so clear that we needed to do something. And I think the people here in Austin just finally threw up their hands and said, we need changes. We need more housing. We need affordability. And so we were finally able to make such an important change. And tell us about another policy change you made. We eliminated parking requirements in Austin before we had what I would consider pretty typical parking requirements.

15:15And it was pretty clear that we were overbuilding parking. So by eliminating parking requirements, we're going to let the individual projects figure out how much parking they need. And anecdotally, we don't have really solid data on it, but it looks like folks are building about 70 % to 80 % of the parking that they used to build under the requirements that we have. And that allows more housing. I mean, there's a clear relationship between if you don't have to build as much parking, you can build more housing. And so between the compatibility changes and the parking changes, you know, 200-unit apartment complexes turn into 300-unit apartment complexes.

15:57You know, 100-unit apartment complexes turn into 130-unit apartment complexes. So we've been able to add supply, and that has really tempered rents in Austin. I'm curious about other infrastructure concerns as you're increasing housing. If you're talking about more people, you may be talking about more traffic or more need for public transportation if fewer people have places to put cars. How did you have that discussion and make changes alongside this expansion of housing in the city? Yeah, that's a great point. Austin has become a very popular biking town and micromobility town. town we have over decades now really built out a very strong at this point bicycle infrastructure that is helping a lot but the most important project is a light rail system that was approved by the voters in 2020 that should get under construction next year that'll be running through the heart of the city but that's critical obviously transportation is critical and we are investing in our transit infrastructure, we need to keep investing in our transit and alternative mobility infrastructure.

17:16Prices in Austin have started to decrease from those recent highs I mentioned earlier. Home prices have dropped by about 26 percent since 2022. Median rents are down$250 per month from their pandemic highs. When you speak to your constituents, what do they say about how housing has changed? I'm talking about both the positive and perhaps even negative impacts. I think it's virtually all positive from the renter's perspective. I mean,$215 a month is a lot of money, especially for the working class people of my district. That's money that can go to healthcare, it can go to education, it can go to taking a vacation.

17:55It's real improvement in people's lives. So it's largely been a positive thing. Austin for many, many years was considered an affordable town. And we're trying to get back to that point where Austin is once again considered an affordable town. And we're getting there slowly. I did also want to point out that the home prices and rents have dropped despite the economy continuing to grow and our population continuing to grow. This is not a situation where the city's largest employers shut down or there's some kind of crisis that caused everybody to move away. The economy, we're facing the same headwinds that all other cities are facing, but it continues to grow.

18:43And despite that, we've been able to lower home prices and lower rents. Who's coming to Austin right now? Are you seeing population growth around younger workers, young families, older people? Who's moving to your city? I would say all of the above. We have had very strong employment growth across a number of different areas. Technology, obviously. we, Austin's the capital of Texas, and we still continue to see a large number of state employees, just I think across various industries. Most of the folks that move to Austin, though, are from other parts of Texas. I know there's this kind of like, oh, they're all Californians, but actually most of the folks that are moving to Austin are moving from suburban or rural Texas to Austin because of the good wages here and the affordability makes it even more.

19:38But we are seeing a lot of young people and we are seeing a lot of new families. No question about that. So when you were describing the zoning changes you made, it sounded as if much of what you were trying to do was build vertically to basically improve on the density of housing. Are you bumping up against any concerns from residents about there just being too many people in the city? That yes, there's more housing, there's more space for people to move in, but the city's just feeling, it's feeling like a little, it's a little too busy, a little too many people. It's losing perhaps part of its, um, its identity because there's so many people coming in.

20:20Yeah, that's, that's a, a strong topic of cocktail conversation in Austin for the last 30 years. Uh, you know, there's a joke about how the Austin was best, uh, when you moved here at age 24, That, you know, whether it was in 1975 or 1995 or 2005, everyone talks about the Austin of old and how good it was. That's a constant conversation. But the reality is that Austin is still a very dynamic, exciting, diverse town. We have seen lots of immigrants come to Austin for the construction trades, for the technology jobs. And so that has, I think, really made Austin a much more interesting place, a much more wonderful place.

21:11So largely positive effects. Again, there's folks that miss their quiet college town of the 1970s. And I get it. It was a beautiful town in the 70s, a beautiful town in the 90s. It's still a great place today. Well, Austin's housing growth has slowed recently, but the rate of new apartments under construction in your city is still among the highest in the U.S. Given where Austin's housing market is now, what does your city need most from the federal government when it comes to housing policy? You know, the area I think that we have struggled more than anywhere else has been housing at the extremely low income levels.

21:50housing for folks coming out of homelessness, for folks with disabilities, for someone with mental health issues and substance abuse issues, those are folks that are very difficult to house because we're not just talking about the physical building, but you've got to provide services for folks in that kind of situation. And those services are expensive. That housing is such a critical need. We've built a lot of it, but we probably need two to three times as much as we've built and we are simply kind of tapping out on local resources, we really need state and federal help for those very difficult housing situations for the poorest of the poor, for the homeless especially.

22:36Well, for other cities facing high housing costs, and that includes most major cities in the U.S., what would you encourage local leaders to take away from Austin's experience over the past few years? Or maybe what questions should they ask themselves as elected officials? And what questions should they ask the community as they try to tackle their housing crisis? You know, for a long time, there was a debate about whether supply would impact housing prices. You know, for a long time, Austin tried to preserve its way to affordability. we kind of conducted that experiment and it didn't work. Ultimately, when we switched gears, you know, six years ago or so, and we just decided to really open the spigot and say, let's build housing, that had a real effect on housing prices, both rental and single family homes.

23:33I think that's the lesson, is that the supply side solution has been very successful in Austin. And if you look across the country, adding housing is a positive thing. It helps lower prices and it leaves more money in people's pockets to, again, go out to dinner, continue their career, do whatever they want with that money. But that supply side solution has been very positive here in Austin. And if there's one question they should ask themselves, their community, as they start to tackle this issue, what is that question? what can I do to encourage additional housing? And I would say also, particularly infill housing, that central city housing has really helped so much.

24:25You have less people on the highways. You have more people in kind of your vibrant kind of center of the city. To me, that is the main question. What can I do to increase housing, especially in the most desirable, most walkable, most attractive areas of my city? Well, that's Chido Vela. He's the mayor pro tem and council member for the City Council of Austin, Texas. Council member Vela, thank you so much for speaking with us. My pleasure. Thank you. I'm Jen White. You're listening to 1A. And we're hearing from you. Here's Wendy in Bellingham, Washington. Building, of course, we need to build more.

25:06But what I see is we're building more, but it's still overpriced. And Bellingham Studios started$1 ,000. When I moved here 20 years ago, I had a little upper floor for$350. So that's part of the problem is the pricing and private equity firms, vulture capitalists, and Airbnb. be. Those three things, I think we need to put regulation on that. Housing is for housing. It's not to buy up so that you can jack the price up and profit off people's absolute necessities. Wendy, thanks for that message. Let's turn back to our panel. Rhonda, what federal support does a Senate bill give to high housing cost cities like Austin?

25:51The Senate bill is actually not a spending bill. It doesn't include any specific provisions with money attached to it. But what it does do is it makes it easier to build. It loosens regulations so that builders have less red tape to get through to build housing. It also opens up community development block grants, which are a type of grants, to new construction, which allows builders to build new housing. There was an expansion of the low-income tax credit in the federal spending bill that passed last year. And so that gives builders who want to build low-income housing a huge well of tax credits to build.

26:35And then they can sort of tap into some of the granular programs that David mentioned in this bill to build more affordable housing quicker. So to the mayor's point, this does sort of start to get at the lower end of the market. And I think that a lot of the callers have pointed out a really interesting experience that they've had, which is they see lots of new housing going up and what's built is the luxury end with a small amount of affordable housing. And really to build housing for extremely low-income people, you need federal support and you need federal programs. The free market can't handle that.

27:10And the idea behind building is that builders are gonna build the newest, nicest, shiniest apartments and houses and those are going to be more expensive. And then the idea is that there's a filtering process where people with less funds get the older properties that are now freed up by people moving in to the higher end is the sort of the thinking behind this structure of just build. Well, David, I want you to explain a little bit more about these block grants that Rhonda mentioned. So those are programs where the Department of Housing and Urban Development distributes funds to local governments.

27:45But you earlier mentioned that these changes could incentivize cities to build more housing, but there are also some disincentives around certain things. Just explain more. Sure. So the bill has a provision that would kind of change the allocation of CDBG funds based on the amount of housing you build as a city. So if there is a city that by a formula in the bill is determined to be really high cost, they're going to need to demonstrate that they are building more housing than their peer cities so that, you know, ideally prices come down and then they would still have access to that pot of money.