On gentrification

 Gentrification exists anywhere where it becomes viable for one household to buy out and combine two units. It's a normal process of urban regeneration. But it's hugely controversial because we've supressed the other half of the cycle--the conversion of depreciated single family residential into multi-family.

Home buyers, housing stock, and the Patriarchy.

https://usa.streetsblog.org/2018/11/02/single-family-housing-upholds-the-patriarchy-and-hurts-moms/

The article argues, persuasively, that suburban GEOGRAPHY does enforce female isolation: By disaggregating shared-use spaces into private spaces, and then burdening women with labor of upkeep and operation of those spaces. Cooking has natural economies of scale (notice bachelors rarely cook), as does childcare (minding ten children is scarcely harder than minding nine).

Some people embrace suburban living. But for many people, suburban living is an imposition. You take what you can get, because it's the best you can afford. Housing is durable, and few people buy new houses: In the last 10 years, there has been (annually) about 10 new house per 1000 people. Everyone else buys used. Each year, if we only build houses for new-home buyers (typically dual-income families with children), then in ten years, 10% of the housing stock is houses best suited for that style of household. Most people are living in hand-me down housing. And like most things handed down, it rarely fits well.

Some Simplicio will doubtless argue that if there was a market for other things, developers would built them. And if there was a free market in housing, they might even be right. Claiming that housing is a free market is either a lie or bullshit (in the technical sense). Zoning forbids multifamily development on 90% of urban land. An attached single family home, ie a townhouse, condo) is still a single family home, without any of the agglomeration economies of multi-family.

Economism

The ongoing expansion in housing units square footage per person and acres per housing unit is usually justified using the 'Economistic' idea that humans are rational self-interest maximizers, capable of gauging the marginal value of an additional increment. In reality, humans are not rational optimizers, but rational satisficers and irrational maximizers. People make decisions on the basis of meeting perceived needs. Once those perceived needs are met, they act to maximize any offered considerations, regardless of their desirability.

"And there is nothing you can do about it".

According to Chris Nelson, to match the ability of the population to pay for housing to the housing supply, every unit of housing built between now and 2020 would need to be a rental. That clearly is not going to happen--but the distribution of prices has to match the distribution of income. So the system will have to reach equilibrium by converting existing owned homes into rental units--either the owner renting it out, or renting out part of the house (joint tenure). 

Further, changing preferences mean we have a massive oversupply of exurban large-lot homes. Massive oversupply, combined with falling demand, and the prices is going to crash. Which means you are going to have a lot of poor people living in the suburbs, despite what they may want."What people want, and what people have to settle for".  Now, all my planning education told me that was the eventual outcome of things--but I didn't expect it to happen so soon. 2020 is a real year, it's coming, I will be alive to see it. The world will be a very different place in my lifetime, and I know what that world will be like. 

Time to buy urban land, I guess.

Housing Bubble Goes On

Never trust a trade industry publication. The National Association of Realtors is cooking the books again. The graph below LOOKS great--time to buy a house! But wait... what are they using? Ah. Not median income (as any sensible person would), but 'per capita disposable income'. Per capita disposable income is an average, and like all averages, is prone to distortion due to large outliers.

Given that the distribution of income in the United States follows a log distribution, can begin to understand how the presence of a few thousand millionaires begins to skew the numbers. 

The reality shows that it will be a couple more years. Political Calculations had a good graphic on it: 

The housing bubble will finally be deflated when that blue segmented line meets the dashed green line. But that may be a while. Housing prices are sticky, there has been some massive Federal intervention, and there is a huge 'shadow inventory' of bank owned homes that aren't even on the market yet. 

But have hope--the crisis part of things is over. Prices are showing a 'steady' oscillation pattern, and the inflation adjusted housing price should meet the trend line within a couple of years. 

But an undershoot remains a very real possibility. The years 1997 to 2000 seems to have been a 'reversion to mean' period, followed by the frantic escalation between 2000 and 2006...at which point the 'teaser' rates on ARM mortgages began to reset, and mortgage defaults began, coming to fullness only in 2008. Historic undershoots of the trend line look to have been in the 8-10% range, and it's not impossible we might see that again. Still, it's been almost two decades since we've seen that much amplitude in the oscillation of housing prices. 

Gotta build something

I was reading about housing starts today, and this phrase struck me:

Construction started on buildings with five or more units at an annual rate of 171,000 units, the highest level in two years. The rate of starts for single-family homes was the lowest in almost two years.

I find it tremendously cheering.  Five years ago, I remain the general despair at the thought of ever getting builders to shift toward developing multi-family properties. "No one will build multi-family, because developers have no experience at it". But the current oversupply of single family homes has changed that--if you've got a construction company, you've got to build something or go broke. Even if you fire everyone, you've still got cost of capital. So builders are switching.

The techniques for building town homes and condos really aren't that different from those used to build mansions and large house. Extra bedrooms, guest bathrooms, second kitchens, second furnaces and water heaters. Simply a matter of adding a few extra walls.

In the long-term, demand for single family homes will resume. But the skills for building decent multi-family units will have been developed, and that will do a lot to overcome the friction associated with developing TOD.