Forbes.com recently reported that several cities in the United States are showing a decline in real estate market values and sales; however, Boise ranks the fifth fastest rising housing market in the United States. In Boise, an analysis by the U.S. Department of Housing and Urban Development showed there is a demand for more than 10 times the number of homes being built right now.
In addition, Idaho Press reporter Margaret Carmel reports that the average rent for a one bedroom apartment in Boise is $899, with even higher prices for two and three bedroom apartments. While rents have risen 20 percent over the last year, wages for the service industry, paramedics, restaurant servers and childcare workers remain stagnant, putting housing out of reach for a growing portion of Boise’s workforce.
Capital City Development Corporation Real Estate Development Manager Shellan Rodriguez recently stated that Boise’s real estate market is currently squeezed by an influx of people with not enough housing for everyone, which has created rising prices across the spectrum. To accommodate the additional 50,000 new residents projected to come to Boise in the next 20 years, Rodriguez said the market needs an additional 1,000 units a year to keep up with the demand. While this benchmark has been met so far, she said it’s all been marketed for higher price points because of high building costs. “If you’re going to create more supply in your housing, you have to have people saying yes it can be near me,” she said. “That’s a tough one.”
So, how did we get here, especially in cities like Boise that have long been affordable?
One answer lies in the immediate aftermath of the Great Recession, when home building ground to a virtual halt. The rebound has been slow and painful. Single-family home construction is now at its lowest rate in four decades. Housing experts tick through a list of reasons for the slow pace: there's tougher zoning, there's not enough undeveloped land, lumber is expensive ... and one of the biggest problems, a labor shortage. With not enough workers, it's taking about two to three months longer to build homes today than it would have in 2006, before the recession. Younger people aren't going into the trades like they used to and those workers who are here and available are hard to keep satisfied.
Some builders can't finish homes fast enough to keep up with demand. All of this means prices for existing homes on the market are going only one direction — up, sometimes stranding people in their current homes even if they desperately want to move. In Boise, for example, 65 percent of homes for sale are on the upper end of the market. Thirty years ago, half of all homes on the market were smaller and less expensive, according to this year's State of the Nation's Housing Report from Harvard University. In 2017, that percentage had fallen to 22 percent, or less than a quarter.
In its quest for more affordable housing, Boise may look to voter-approved bonds. Boise Mayor Dave Bieter admits there's a real housing crunch, saying, "Our figures show we need to build about a thousand units a year in the city of Boise to keep the kind of demand we're seeing, Boise is way behind on that goal.”
Erik Kingston, housing resources coordinator for the Idaho Housing and Finance Association, said the nationwide market is being affected by a huge influx of investment from overseas, largely from China. He echoed Rodriguez and called for the construction of more housing units, especially for the middle class, to increase market supply and bring prices down for everyone. Kingston also shared several concepts such as cooperatives and other housing projects that have been developed in Europe and in cities like Portland, Oregon, that bring costs down for people willing to live in smaller, shared spaces as a solution to the problem.
"Builders continue to monitor how tariffs and the growing threat of a trade war are affecting key building material prices, including lumber," said NAHB chief economist Robert Dietz in a USA TODAY report. "These cost increases, coupled with rising interest rates, are putting upward pressure on home prices and contributing to growing affordability challenges."
Curbed recently reported, “Walk through the downtown of any major U.S. city today and it may seem counterintuitive, in the midst of today’s building boom, that we have a housing shortage. In fact, we’re in the middle of an affordability crisis.” According to the Urban Institute, for every 100 extremely low-income households in need of an affordable apartment, only 29 units are available, and researchers at the Harvard Joint Center for Housing Studies found that 38.9 million households are cost-burdened, paying more than 30 percent of their income for housing.
“The simple fact is, in booming economies, it’s faster to hire a software developer than build a new apartment building,” says Kristin Siglin, senior vice president of policy at the Housing Partnership Network. The U.S. isn’t just short a few units, we’re falling woefully behind. A report by the National Multifamily Housing Council (NMHC) and National Apartment Association (NAA) suggest we need 4.6 million new units by 2030, and mayors across the country have made affordability a cornerstone of their campaigns. Experts and officials will, correctly, explain that the issue often comes down to cost: Affordable housing development often doesn't add up, and without enough government subsidies and policy support, this important need goes unmet.
So, what’s the solution?
In an article titled, How You Can Fix America’s Affordable Housing Crisis, Forbes reported, “The short answer is to invest in new supply (i.e., development). We need to build as much new housing as possible, including affordable and shiny new luxury homes in order to help offset the nationwide gap. As incomes rise and people are able to afford higher rents, they step up out of the older, more affordable housing stock, leaving room for the middle-income folks to step in."
Are you considering your housing options and whether or not you should make a move? Give us a call today and one of our friendly agents will help answer any questions you may have about our current housing market and how it relates to you.