Here’s a chart about the rising vacancy rate for single-family homes (in general) around the US.
It comes from this interesting article about whether or not there’s an oversupply of single-family homes. Here’s the punchline:
In fact, it turns out that it isn’t only economically struggling areas that have stubbornly high single-family vacancy rates. Many faster growing metros overbuilt during the bubble still have lots of vacant homes.
It’s hard to base conclusions on housing from a national study.
I bet this is correct and there is an over supply of SF homes.
Why are more permits being issues for sf homes?
Why Is the new housing sector of the economy growing?
The key information in the article is that there are a huge number of homes being held off the market. Here in Minneapolis alone there is something close to 600 homes on the “vacant listing” you have to have tons of cash to get the house back into circulation because of fee’s that have nothing to do with encouraging safety. It is a very bad policy.
It is also really expensive to convert a building to rental, in addition to all the normal inspection fees MPLS has a “rental conversion fee” of $1,000. I understand this applies to any number of units.
Then you have big investors and developers who have the laws written in their favor, often get public funding and reduced property taxes, are not required to follow the same rules as small property owners and tend to favor bulk buying and building strategies.
The dwelling units held off the market are not factored into the “vacancy rate” numbers so it appears there are housing shortages when there are actually surpluses.
Housing is hard to analyze by simple charts and graphs. It is not fungible (one unit is not easily replaced by any other unit) so the normal theory of “supply and demand” is not especially useful or easily applied when discussing housing economics. A surplus of houses in Detroit will not bring down housing cost in LA.
The question is what are we going to do about it? I would advocate that local Govt. stop issuing building permits for more units to be built, anywhere in the metro area, particularly SF until this gets balanced out.
There is clearly a massive housing surplus in the USA, even though some areas have shortages. From looking around the metro area I see surplus, even in Minneapolis where the vacancy rate is presented as artificially low because of units being held off the market mostly by city govt. Skewing the numbers and presenting a false need for excessive building.
I’d guess that one reason why ‘no new permits’ might be tough is because so much of our local economy depends on the new housing construction (and road construction) industries. Housing development is synonymous with economic growth for many places.
That sounds like a really nice way to enrich those who already own houses and those who rent apartments. I suspect those are not your policy goals, and I don’t think they should be.
Nor am I sure how it does much to address the problems you highlight.
One thing you are taught in real estate school is that real estate markets are local markets. I can’t claim to know anything more than the market I am most familiar with, which is North Minneapolis; however, I would imagine the numbers for North account for the majority if single family home vacancies in Minneapolis.
On the Northside the various reasons homes sit vacant are that they are not available for acquisition. Some are in a foreclosure statutory redemption period. Others are owned by owners or banks who simply walked away from them and have since racked up so many back taxes and assessments against them that it is not feasible to rehab even if you could track down whoever could legally transfer title and convince them to sell. Those taxes and assessments are not collected anyhow and in fact the demolition COSTS between 10-20K (depending) and the lot does not generate tax revenue. Furthermore, the lot, through tax forfeiture, ends up in County ownership and further costs the public dime for sidewalk shoveling, grass cutting, and illegal dumping removal. When those lots are finally built upon, because the market in North Minneapolis does not support new construction, we subsidize 60-80K per newly constructed house. Each existing house that we rehab vs. demo saves around 100,000 in unnecessary public expenditure or lost tax revenue. We often hear “the numbers don’t work” to rehab a house, but the numbers don’t work to demolish a house either – but we don’t talk about that.
Other vacant homes may be waiting for tax auction (I don’t understand why in some cases this is YEARS), or may be owned by CPED or a nonprofit and is “in the cue” awaiting rehabilitation. Some are CPED owned and *could* be available for acquisition, but nobody knows about them. Apparently they have not yet even figured out the most basic strategies for making it known a house is for sale. Such as a sign that says “For Sale.” And their process for acquisition is a long and bureaucratic one.
Some houses the city has bought up to demolish because they consider them “functionally obsolete” because of their small square footage or being on a postage stamp sized lot. Those little “worker cottage houses” exist because there was a time where people of modest means lived in modest houses. When my life hit the skids at one point, I moved into such a house and doing so allowed me to survive. I especially like to stick up for those small houses because those truly are our “affordable housing.” Years ago on the CANDO housing committee (Central Neighborhood) we were shown the scoring tool the city used to determine whether a house should be demolished and it was essentially based on the idea that every house should be 3bedrooms, two bathrooms, on a full sized lot and have a two car garage.
In short, most vacant houses in MPLS are found on the Northside and after years of studying this issue, I can say the biggest reason for this is not lack of need or demand, but that there are circumstances surrounding these houses that are bureaucratic in nature preventing them from being available to acquire. In most cases, you couldn’t even if you wanted to. At the time of the last census, Minneapolis expected a population increase with al of the new housing units added in Uptown, Mill District, Wharehouse District, etc but were surprised to learn that our population did not grow and the reason was that all of those gains were offset by vacancy or demolition of housing units in North Minneapolis.
It is frustrating for middle class single people like myself that don’t want to live in a condo or townhouse but can’t afford the 2000+ square houses that are the only new construction. I bought my house from my parents, but it seems there’s a lack of supply of modest houses in the suburbs, my neighborhood is full of 1960s vintage ranch houses and I’ve rarely see one sit for sale for more than a few weeks.
There are a lot of sub-2000 square foot houses at a wide variety of price points in lots of city neighborhoods and the first ring suburbs.
But yeah, all of them were built before 1950 or so.