Last week in my article on self-driving cars, I noted the phenomenon that affordable (say $200,000 or less) new houses simply aren’t being built anymore and speculated that might lead to people choosing longer commutes. As a second part, I thought I’d look at some possible reasons affordable houses aren’t being built any more. For the purposes of this article, “house” means “single family detached house,” the kind where you can paint your siding whatever color you like and plant a flower garden in back. I also acknowledge that there are people that prefer different formats of housing–I had a friend that liked his detached townhouse because he could play movies as loud as he wanted on his home theater Friday nights and not have to worry about mowing the lawn the next day. But this article is about those that don’t.
First, the original 1951 “Levittowner” house, priced at $10,990; 1000 square feet; three bedrooms, one bath, one car garage, inflation adjusted with the Consumer Price Index, would sell for $97,100 today. Estimated monthly payment: $67.00 (or $592.00 today) At that price unless you’re flipping burgers for a living almost anyone could afford it.
Now here’s a house typical of what’s being built today, the “Bristol”: priced at $320,990, 2185 square feet, four bedrooms, 2.5 bath, 1/5th acre lot, estimated monthly payment: $1245.00. In practice, I’m sure they’d be willing to build you a house and sell it for that price if you insist, but if you walk up and want to buy a house, just like buying a car off a dealers lot, it’s probably filled with expensive add-ons. This one has an upgraded kitchen, sun room, and garage extension, pushing the price to close to $400,000. To be sure, there are some advantages to durable finishes. In a memorable cooking disaster my sister set fire to our Formica countertops. And I absolutely love spending evenings on the couch in the sun room or in a hammock on the deck. But not everyone can afford these.
So what do you do if you’re lower middle class and want a house today? You either have to settle for new multi-family housing instead, or a used house. For now, at least, there’s a plentiful supply of used houses, but with a declining supply (thanks to tear-downs, including some initiated by cities including Richfield’s apparent war on affordable houses with their willingness to tear down entire neighborhoods), and increasing population, eventually there will be a day of reckoning, with used prices being unaffordable also. (Compare Portland, median home value $330,100, as opposed to $202,500 here.) So choices will be a house in St. Cloud (at least you can sleep during your 2 hour commute in your electric self-driving car) or settling for a stack & pack.
I have my own house now, but I see this as a problem both out of altruism because I want other people to be able to have theirs, and selfishness because in a classic case of a first-world problem I want my house to be worth as little as possible to keep property taxes and insurance costs down. As another data point, here’s my house: 1100 square foot, two car garage, originally bought by my parents for $27,900 in 1970, very slightly used (the owners got divorced and had to sell right after building their dream house). That’s $165,000 today, so still pretty affordable for a basically new house.
So why are no affordable houses being built?
Quite simply, I don’t know. So I’ll throw out a few possible reasons:
#1 Consumer and developer preference is changing
Just like you can’t buy a Yugo anymore, consumers are demanding more space and luxury in houses.
To some extent, to avoid living in a used house or an apartment, I believe people are overextending themselves and buying stuff they can’t afford and might not even want simply because that’s all that’s available. I know I’d eat Ramen and rice every night if it meant not having to live in multi-family housing.
#2 Developer preference
But what if it’s not just consumer demand for more and more elaborate houses. What if builders have simply decided they’re simply not interested in building affordable houses. I’m not knowledgeable on the economics in this, but maybe they figured out that they can maximize their profit by only building mansions and multi-family housing. Usually it’s the option in the middle that gets forced out, because those consumers can stretch themselves to upgrade, or settle for a downgrade. (Again, I’m talking about people that want to buy a house, not those that prefer multi-family housing, which is why I use that characterization).
And it’s not just housing. How well did Mervyn’s do compared to Macy’s and Target? How well did Mercury do compared to Ford and Lincoln? Although I’m lucky enough to have been able to get a used house and be able to live comfortably, given the choice of living in a house and eating rice and beans every night, or living in multi-family housing and eating steak, I’d take the former.
#3 Zoning policies by cities trying to maximize their tax base
But what if it goes even above builder preference and is skewed by local policies? New houses in Shakopee must be on 1/5th acre lots, Compare that to Levittown, which was notable for having extremely generous lot sizes because land was cheap but in the booming post-war years construction was expensive, which had 1/7th acre lots. Minneapolis proves you can have a single family house on a 1/12th acre lot. A typical lot in Shakopee is $85,000. There’s a general rule in the construction and finance industry that you build a house worth three to five times what a lot is worth, so this means $250,000 to $400,000 houses are built. Theoretically, if we went back to 1/7th acre lots a sub-$200,000 house would be possible.
#4 Anti-growth policies artificially limiting supply
But what if the problem is even beyond local zoning? The area in blue the MUSA (Metropolitan Urban Service Area) line. No municipal sewer and water service is allowed beyond it. Instead of a natural barrier limiting land supply, we’ve created a political one.
In addition, Lake Elmo and Afton have anti-growth policies of their own and, even with the new St. Croix Crossing, the river is a physical and psychological barrier. If there’s anything I learned in college economics, it’s supply and demand. If you limit the supply of something, with an increase in demand, the price is going to skyrocket. The Builder’s Association of the Twin Cities obviously has an agenda to push so they might not be the most unbiased source of information, but it’s the only information I could find. They claim a shortage of build-able land is adding $35,000-$100,000 to the price of a house in the area. When you see how much more houses in Portland cost with the much stricter anti-growth boundary, or the Bay Area with pretty significant physical boundaries, it does seem plausible.
So what is the solution? I don’t know.
As should be obvious, I’m not even entirely clear what’s causing the problem. It could be a bit of all the above. But for starters, we could eliminate any zoning that forces a certain lot size and minimum value of house to be built. Then, in the context of that, evaluate whether the MUSA line really is causing a land shortage, and if so, expand it.
I’m curious to hear your thoughts on multi-family housing. Do you like them, would you be willing to live in them?
No, absolutely not. And I know what it’s like since my sister lived in an apartment in college, my father lived in an apartment and now owns a townhouse, and a friend owned a detached townhouse.
I’m Generation X, and thus value owning stuff. I look at a car and say “this is mine!”. I look at the plot of land and house I own and say “this is mine!”. All the advantages of a house are advantages to me. I’ve dug a garden out back, stained it the color I like, put huge lag bolts into the wall to hold my traffic signal collection. I work out of my house and in the winter a week or two will go by and I’ll only leave to get groceries. I want to watch movies on my home theater at top volume Friday nights.
My sister living in an apartment in college one of them got their car broken into, they constantly got annoyed bangs on the wall if they got too loud, and in turn would have to do so to quiet down the neighbors. There was always competition for the coin washing machines. They were always eager to leave and go back to their family houses when they could.
In turn, I don’t value fancy food, sporting evens- I’ve never paid for a sporting event ticket in my life, I generally go to a sit-down resteraunt a couple of times a year on birthdays. Although I do take a vacation once a year and go on road trips, in general the way I see it if you spend money like that it’s gone and you have nothing, so I do as little as possible. I’ve never been in a Whole Foods in my life, As expensive as people say it is I know it’s not for me- preferring Walmart. As long as I don’t get food poisoning the groceries they have are cheap and good enough for me. I understand Millennials aren’t so material goods oriented and obviously living in multi-family housing in the city fits a lot of them (although my stepsister and step-cousin both have houses a lot nicer than mine, one is a hobby farm with horses), but I’m not a Millennial
BTW, you’re free to feel however you want about how you spend your money, but a good amount of research is showing that purchasing “experiences” rather than “things” is far more likely to make you happy.
But that’s just on average, and every person is different, and I have no doubt that you yourself are a happy person. But don’t think that what makes you personally happy is what should make everyone personally happy.
Something important to remember, critique of the suburbs is not critique of the people that have chosen to live there (at least the good critiques aren’t, but there are plenty of bad ones on both sides that attack the people). It’s a critique of the cultural and political environment that have distorted things such that the 2000 sqft house on the quarter acre lot becomes the rational choice. There’s nothing inherently wrong with a single family home (I live in one! And with the exception of painting the outside of the house which I in no way care about, I could probably do everything that you do in yours). But maybe the suburban model just isn’t going to work forever. Maybe the affordable single family home neighborhoods are going to have to look a lot more like the working class neighborhoods built in the early 1900s like Phillips and Powderhorn and Longfellow, and much less like the suburban neighborhoods of the second half the century like Bloomington, Shakopee, and even some places in Minneapolis.
It was a joke. Your article was just a long screed about why you don’t like houses that touch each other.
It’s probably useless to point out that assuming all apartments and condos are exactly like your sister’s college apartment is as inaccurate as assuming that a mansion on Lake Minnetonka is exactly like a run-down, 900sqft house in Phillips or wherever.
For example, I’ve lived in my apartment for just over a year, and I’ve heard my neighbors exactly once in that time. Growing up in a house very similar to your ideal in southern MN, on a 1/3 acre lot in a small town, I was kept awake by noise coming from the next-door neighbors at least once every couple of months.
Nothing wrong with an attached rowhouse. You OWN it, you can do whatever you want with it, apart from demolishing the shared wall and allowing the neighboring house to fall down.
I’m a big fan of owning (fee simple), but I don’t see the attraction of lawns and setbacks.
I’m not sure why rowhouses have largely been made illegal to construct, but they should be legalized again.
Please notice that the old brick/stone rowhouse neighborhoods in Chicago and New York are super-super-pricey now… because people love them. They have the advantages of owning your own house (even soundproofing, thanks to all that brick and stone) and the advantages of living right in the middle of the city.
Can I watch “Top Gun” on my home theater at top volume at 10:00 on a Friday night without the neighbors complaining, like I can in a detached single family house?
If so, then I concede a row house would be just as good.
If the walls are thick enough… yes.
The walls in the old masonry rowhouses are thick enough.
#5 construction costs. Materials and labor continue to get more expensive and outpace wage growth just like everything else. So it costs more in inflation adjusted dollars to build new housing (single family homes and apartments alike).
Basically it’s not entirely “evil” developers bent on maximizing profits. It costs more and they pass those costs along. I think zoning is definitely another major culprit though.
Zoning factors into higher land costs because we’re under utilizing land and running out of cheap land to build on close enough to stuff. So both the land and the building on it cost more than it used to.
Not that you’re wrong, but “labor” costs are wages.
I realized the possible confusion there after I posted it, but construction jobs are one of the few solid middle class jobs that haven’t had their purchasing power completely eroded like other sectors. There’s a reason economists are very interested in the seasonal construction labor market and new housing starts, and it’s not just because of mortgage lending and commodity prices.
I appreciate the inquiry, but the condescension towards apartments (“stack & packs”) is truly irritating.
My guess is that (1) the profit margins are too low for developers, (2) snob-zoning limits the construction of smaller houses on smaller lots, and (3) the dearth of quality rental housing directs many dwelling-seekers into the lower end of the property market, thereby squeezing those who truly wish to buy into higher subcategories.
The ‘zoning by cities trying to maximize tax base’ headline seems a bit counterintuitive: it’s not self-evident that restricting the number of residents will somehow lead to increased municipal tax revenue. Nor is it clear how the unwillingness of the government to subsidize infrastructure into the horizon ad infinitum is distorting the market for land; it would seem to me that the government’s continued expansion of infrastructure on the fringe is itself a market distortion.
I’d also add that there’s isn’t a whole lot of reason to eschew a “used” house if you’re trying to keep costs down.
Yeah this is just full of toxic rhetoric. “stack and pack” being the standard way to refer to anything other than a SFH. Monte, by your own admission, you should have replaced every mention of SFH with “sprawling homes” because you only use one terminology to counter the other.
Also not a fan of the phrase “used home” as it implies anything other than new construction is less than ideal and that’s got all sorts of complications (although one good one, it means we should be more willing to tear down housing to build new, bigger housing) But I suspect your views on what the long term price of a house should be are very outside the view of the mainstream. Unfortunately a large portion of our economy has built around the idea that a house should increase in value forever.
I’ll repeat my proposal. Other posters stop using the term “Sprawl” to describe development that they personally don’t like, and I’ll stop using the term “Stack and Pack” to describe housing I personally don’t like. Although on the other hand by using it I’m just lowering myself to other people’s levels, so maybe I’ll stop.
As for “used” house. What term should I use? “Pre-owned”. If you say I have a “pre-owned” car you sound like I’m a dealer trying to sell it. A used house is likely to have similar issues- a leaky roof, old furnace, decaying wiring, just like a used car leaks oil and has a sticky transmission. So although there are reasons to prefer a used house if you like the neighborhood or mature trees or particular architectural style, all things being equal a new house is better because you can probably go 30 years without major issues once any initial kinks are covered under warranty.
It’s your article, and since it’s not in response to anything in particular, you’re free to set your own tone. Jumping straight to the inflammatory isn’t going to win you any awards. I don’t really see this constant attack that you seem to be finding in the comments sections in articles, but I’m definitely not seeing it in the articles posted here. To be honest I’m a little disheartened that you even made it past the editors.
As for used homes, they’re just homes. They’re durable goods that in our current political and cultural environment should last forever. Even if you don’t think a used home is not as good as a new home, it doesn’t matter. “Used” has a negative connotation so to put it in front of homes you’re putting them in a negative light. If you have to differentiate them from new homes, call them pre-existing structures or something. And the economic and environmental cost of only new homes being desirable (in a culture where we’re not very willing to just tear something down as soon as it goes out of fashion) is incredibly high.
And again Monte, you’ve attached a huge portion of your personal identity to wanting a single family home in the suburbs. But it leads you to make bad arguments. Number 4 is just absurd. The sewer service boundry line exists in part because it’s expensive to serve these outlying fringes. That’s not market distorting. What would be market distorting is letting sewer get extended out as far as anybody wanted to take it, and then making the region as a whole pay for that. If you want to build out that far, pay the true costs.
And finally I’ll add another option that you didn’t consider: the idea that the suburban experiment was a failure and that as a society we just can’t afford, economically, socially, environmentally, to have a vast majority of people living in SFH. I don’t know, maybe that’d be an interesting angle to investigate rather than taking pot shots at the city because you personally don’t like it.
Plenty of posts with “Sprawl” have made it past the editors. That’s definitely toxic rhetoric directed at the suburbs. But I’ve decided I’m not going to lower myself to that level so I won’t use the term “Stack & Pack” in my posts anymore. Also since it seems to be a local term (I didn’t realize that before I started using it) and people from other areas might read the articles.
And what are the “true costs”. No one has ever been able to give me a real number. Just things like the portion of roads not paid for by user fees (and buses and goods travel by them too so you’d have to subtract out), That doesn’t tell me the exact dollar amount a person living in the Wedge is being subsidized by a person in a downtown high-rise, or the person in the Wedge is subsidizing me, or I’m subsidizing a person in Elko.
No one is using chicken scratch suburban side streets and culdesacs (culs-de-sac?) to move measurable amounts of goods for anything other than delivery to residences. Nor is anyone else using your sewer hookup. These things are quantifiable expenses.
Also stack and pack is referencing a particular kind of housing (multifamily attached apartments), whereas sprawl is a development pattern writ large. The equivalent term would be something more like “tacky little cookie-cutter s**tboxes” or something more along those lines if we’re looking for pejorative terms for a particular form of housing.
The “true cost” of extending sewer to the fringe is… the cost of extending sewer to the fringe. Plus any marginal costs if additional capacity is needed. I mean, I think that’s pretty straightforward.
If it costs 3 million dollars to extend supply to a 100 home development and $5000 per house to connect to it (these are made up numbers btw, no idea what it would actually be, though they actually sound low to me) would it not make sense to pass that $35k price per house directly to the buyer than diffuse it through the whole metro area?
I think people should be able to live wherever they want, as long as they’re willing to pay the true costs, though defining true costs is a giant bag of worms. But I think we can at least agree on the very easily quantifiable cost of sewer expansion.
Of course, this discussion is inherently tricky and complicated. The way we’ve set our systems up makes it hard to pinpoint exactly where costs, payments, transfers, and users are coming from. It’s hard to know who in our current system would benefit from a shit in tax & fee structure vs who would feel pain, and of those who’d feel pain, how many would just suck it up because the alternative isn’t worth it to them (for example, if you had to pay a toll every time you drove on a freeway, you would likely pay for it). It’s hard to put a cost to equity issues (especially lingering ones from decades past) and assign them to anybody in particular.
I’ll also note that, although everyone knows I don’t like the city, this article had absolutely nothing to do with the city so I can’t be taking pot shots a it. This is about why, given a blank plot of land in the suburbs, developers are either putting up multi-family housing or $300,000 single family housing, and not $100-$200 houses like they did in days past.
It’s an interesting question, and I don’t think we’ve yet identified a good answer.
Part of me thinks it’s just an installed base issue. The great suburbanization wave of the 50s and 60s happened and that housing stock is still in use for more affordable single family homes.
Another part is probably land values, which have appreciated enough closer in to make a small, inexpensive house a mismatch for the cost of the land it would occupy.
Finally, I think you will find houses in those price ranges if you’re looking far enough away. Of course, they come with significant other costs if you work in the cities.
“This is about why, given a blank plot of land in the suburbs, developers are either putting up multi-family housing or $300,000 single family housing, and not $100-$200 houses like they did in days past.”
Minimum lot sizes and setbacks are a huge part of it.
The land is worth more now than it used to be. Given that, what *used* to happen, from 1820 – 1950 (Before Zoning) was that the developers would put more and more houses in per acre, eventually moving to rowhouses.
But that was made illegal by zoning. When you have to use a large lot because of minimum lot size requirements, and then you have to have large setbacks on either side of the lot and in the front and in the back, and you have maximum lot coverage rules, you end up wasting half the lot.
To make up for this, the developer builds a building which is twice as expensive.
Eliminate all the “anti-density” zoning rules and the developer will build two houses which are each cheaper.
Actually, in Los Angeles, where there are practically no yard/setback requirements, you see this all over in the cheaper neighborhoods: people don’t have back yards, they have additional houses tucked in where a back yard would be. But that’s illegal in most zoning codes (LA is an exception).
” A used house is likely to have similar issues- a leaky roof, old furnace, decaying wiring,”
You bought a used house, Monte. Did it have these issues?
An older house that has been well maintained is not inherently suspect, just as an apartment is not inherently a “stack and pack.”
“all things being equal a new house is better because you can probably go 30 years without major issues once any initial kinks are covered under warranty.”
All things are not equal.
Not these specific issues. The roof got destroyed in the big storm about 15 years ago and replaced by insurance. Otherwise I’m sure it would need it now at our out-of-pocket expense. And the furnace was replaced shortly before. And I upgraded the wiring for my home theater and home office But there’s the following (expensive) issues:
1) The cedar siding cracked and allowed water to get into the insulation, so it had to be stripped down to the studs, re-insulated, and new cedar siding put on. We paid for upgraded insulation, because unlike newer houses the walls were just
I don’t know where the hell you live but most homes are “used.” My parents live in a very nice home on Lake Minnetonka and someone else used to own it. Their pervious home in Chanhassen was quite nice and was previously owned. Niceness has nothing to do with newness.
I should point out that for *some reason* most cities have failed to require thick soundproofing walls between apartments. It’s a regulatory requirement which adds pennies to the cost of construction, but makes the apartments much much nicer.
Nice post, Monte.
I’d say that Wayne is right, construction wages are higher now relative to the growth of the economy or inflation index, which plays a huge part in home costs. I’d also agree that zoning plays a part. If growth boundaries are bad, then so is minimum lot sizes in exurban areas, as they effectively limit houses per acre. When a developer has to bundle all the new road & utility costs they pay for a subdivision into each house (which also cost more in real dollars than 1950), and lot sizes demand 3-4x the street length per home (not to mention width), costs will rise.
Tangentially, I’d say that the pricier home finishes (which don’t really *cost* all that much more to developers but fetch a higher demanded price) are partially the result of the zoning issues you & I cite. Limit how many homes can possibly be built in a new town of 10 square miles (6,400 acres at 70% net buildable lot area accounting for schools/roads/parks = 8,900 homes on half acre lots), and developers will naturally cater to the folks with the most money.
Finally, I do think borrowing affects purchase price. Interest rates (set by the Fed) have seen a steady decline over the past 30+ years. A fixed budget of $1,500/mo buys a more expensive house at 3% APR than 7%.
This just in: People who can’t or won’t spend more may not necessarily get more.
“I want my house to be worth as little as possible to keep property taxes and insurance costs down.”
It’s probably worth noting that relatively few homeowners share this view — most regard their house at least partly as an investment, and want the value to appreciate. Why else would so many fight against developments that are perceived as bringing down property values? The entire housing industry in America, rightly or wrongly, is premised on rising prices. That’s the tide low-priced houses are swimming against.
Here are some of the issues with building new affordable single family housing:
1. Whether the house is large or modest, they all need a minimum amount of the really expensive spaces. At least one bathroom, a kitchen, and an exterior building envelope. A foundation and a roof. Your cheap one story 900 SF house has exactly the same roof and almost the same foundation as your far less expensive (per square foot) 1,800 SF house.
2. No matter how small the house is, you need to pay to mobilize the construction crew. There is a fixed cost associated with just showing up, no matter how small the house will be. And a lot of people need to show up. General, HVAC, plumber, electrician, code inspectors, excavator, painter, etc. All of these have a fixed cost they need to cover before they even start work, regardless of the scale.
3. Interior walls are cheap and easy. I’ve built them by myself in a day, and they look okay. The consequences of a mistake are pretty minor (just fix whatever you messed up). Exterior walls are expensive, complicated, and the consequences of screwing one up are large (an expensive leak, a failed window, or a collapse). A big expensive home has four exterior walls. A small cheap home has four exterior walls. An apartment may have only one exterior wall.
4. A lot of the infrastructure is also proportionately a lot more expensive in a smaller house. It needs a furnace, it probably has air conditioning, it has a stove, a dishwasher, a refrigerator, etc. All those appliances cost exactly the same in a 900 SF house as in a 2,000 SF house. Both houses will have two exterior doors, a chimney, the list goes on and on. Each of those items is spread over a lot fewer square feet in the small house, driving the average cost per square foot higher than in the bigger house. When that cost per SF number gets too big, the house flunks the value proposition. It can’t be financed when it is compared to an existing structure.
5. The lot probably costs exactly the same whether it’s a small cheap house, or a larger more expensive house. The driveway, sidewalks, etc. cost exactly the same for the cheap 900 sf house or the 2,000 sf house.
6. Add all this stuff up, and the 900 SF house costs almost as much as the 2,000 SF house. But it sells for half price. So, we get the 2,000 SF house.
A rowhouse has only two exterior walls. 🙂
This is an interesting question, and I’m sure zoning and developer profitability have a lot to do with it. I think Monte makes a good point that one of the main attractive features to buyers of new homes is that they won’t have to spend a lot on maintenance for many years. For buyers with less money to spend, this can be a serious issue, and it influenced the choice of home my husband and I made when we bought our first house. Knowing we didn’t have thousands of dollars lying around for a new roof or sewer backup, we bought a 15 year old house far out in the suburbs, rather than a 50 year old one closer in.
But this is also one of the main attractive features of multi-family housing — that maintenance costs are shared and don’t become an immediate cash flow disaster for a homeowner. Home buyers at lower price points may wisely prefer multi-family housing of this reason.
Another factor is demographic, that single person households are rapidly increasing in number. Single and two person households may prefer multi-family housing because they can also avoid the work and maintenance of a yard, while enjoying shared amenities like pools and workout facilities. Families with kids who live in the suburbs want as big a house and yard as they can afford.
We also already have thousands of 1200 sq ft 3 bed 1 bath homes in the Twin Cities available for those who prefer that style of house. If they can bear to live in a “used” home.
I tend to agree with Emily’s last paragraph in the comment above.
It’s kind of amazing that you wrote this entire piece, even mentioned “supply and demand” as a general concept, apparently without considering that perhaps the existing supply of small, affordable houses is meeting demand. Large swaths of the central cities, the entire first and a half ring of suburbs, etc. are loaded with smaller houses. Why would developers build more of something for which there is already an adequate supply?
Also, a lot of these affordable houses are in substandard repair, often having been neglected by buyers that are poorer or now much older than their original occupants. (Drive around any first ring suburb not named Edina or Golden Valley to see the disinvestment.) Building smaller/affordable single-family homes 15-20 miles further out is the last thing that struggling first-ring suburbs need. We need MORE demand for existing first-ring homes, not more supply.
I think this is the simplest explanation. In the 50’s there wasn’t a large supply of used SFH in the suburbs, so they had to be built. Now there IS a huge supply of SFH in the suburbs, so we don’t need to build more unless a particular homeowner wants to have one built. And then they pay for it.
It’s worth noting that the 1950s was a very bad period for home quality; houses from that period are crap, generally. They were made with the cheapest brand-newly-invented materials.
A house from the 1940s is generally top-notch quality (only the rich could afford to build new *during* the war), and quality is actually pretty good from the 1930s right back to the Victorian period. Quality starts rising again after the 1950s.
Part of it is my own observations. Typically when a house in my neighborhood goes up for sale, it’s sold within a week or two. That’s a split-second in real-estate terms, so it tells me there’s already a shortage of such housing. More demand for existing houses is precisely the problem I see, because it means higher prices for them and more people having to settle for multi-family housing when they’d rather not.
But it is possible that’s the explanation, that the demand for existing houses isn’t at the point yet where there’s more incentive to create a larger supply. But the question is could we, with zoning requiring large lots and anti-growth policies limiting the supply of lots.
I don’t think anyone who wants to buy a single family home settles for multi family. They buy farther out or in a less desirable area or a house that need more work.
That’s not necessarily true in the ‘starter home’ segment of the market. People have fairly hard limits on what they can spend, especially when you add in daycare and commuting costs. I’ve known several young families that bought townhomes because they really wanted to own before they had kids, but couldn’t afford single-family close to their parents/siblings. They ended up in townhomes in places like Big Lake, St. Michael, Eagan.
These were all folks working pink-collar jobs in downtown Minneapolis, since they’re people I’ve known from work, though most of them had spouses with more lucrative jobs.
The genuinely poor are often settling for living in smaller apartments than they actually want — families of 5 in a 1 bedroom.
This is in Minnesota.
So, you know, money is always an issue.
nobody’s serving the market of the genuinely poor except maybe HUD, though – there’s no profit in it. There is plenty of room for profit in the $200,000 home market – though maybe not for new development.
Town house or duplex, sure. I guess that’s multi family?
Regardless, it’s not Monte’s vision of being stuck in a low-quality apartment.
I guess here’s my thoughts on my choice of words. The article is about how you can’t buy a new house for the equivalent of what one cost in 1950, or 1970 anymore. So irregardless off my personal preference, If you’re a potential home-buyer frustrated by this, a multi-family housing is going to be a “stack and pack”, a pre-owned house is going to be “used” and a $300,000 house is going to be a “mansion” (and not one commentator here objected to that particular word). In the end though I think I regret using them because people are commenting on those particular words instead of analyzing the article, so in the future I’ll save them for the Strib comments section rather than serious articles.
People have commented on the substance of the article, but it’s hard to take it all seriously when your overwhelming bias is showing through.
#1) I don’t think there’s a lot to disagree with here, but again you throw your your weird biases and judgement. You think other people are spending too much money on things that you wouldn’t spend money. You’d give up so many of life’s luxuries to escape the horrors of multi-family housing.
#2) This one’s just kind of weird, and is really an amalgamation of the rest. Developers are in this to make money, so they’re going to build houses that nobody wants, and they’re not going to build houses that don’t maximize their profit. If people are buying them, they’ll keep building them. Also, gotta throw the lengths you’d go to to avoid multi-family housing again!
#3) I don’t think this is at all why zoning exists. But the paragraph you wrote doesn’t really say much, just some ideas about lot size. Zoning is a complex issue, and a few sentences comparing some lot size doesn’t really do it justice, or even add much to the conversation
#4) has been covered here already and is really the worst. And I know you hate it when people use the word sprawl, but by using rhetoric like “anti-growth” you’re really advocating for sprawl here. Let’s not delude ourselves and think that outside the MUSA line we’re suddenly going to build SFH neighborhoods at the density of central Minneapolis, or even where you are in Bloomington. No, they’re going to be monstrous houses on monstrous lots with winding street grids. It’s going to be sprawl (which is a type of development, not a type of structure). And if the word sprawl offends you, then I’m sorry. While there’s not a precise definition, it is a term used by researches to generally describe a specific type of development. I think the only place you’ll find “stack & pack” is on unhinged billboards in the exurbs.
Mansion doesn’t really have a negative connotation, though there’s one very heavily implied in a case like this where you’re basically implying McMansion. But you didn’t say McMansion, you said mansion, which is basically a benign term, so whatever.
Overall I feel like this didn’t do a great job of engaging with the overall issue or even the points that you brought up.
A piece I read a few months ago on this same topic, which I thought was a good read: http://www.architectmagazine.com/practice/market-intel/the-demise-of-the-starter-home_s
That was my mistake then, not using the term McMansion. I thought “mansion” flowed easier.
How much is the average new home being sold for in the Twin Cities? The average townhome? The average condo? What is average rent in an apartment? How has this changed over time, inflation-adjusted? While I feel like the premise of your article is true (new construction of single-family homes is less affordable than it used to be), it would be nice to see the data. It would also be nice to see what the cost of commuting adds to the typical price of a new home.
I agree the article is light on data and heavy on generalizing from personal anecdotes. To me, it reads: Monte greatly prefers new SFH in the suburbs and assumes the majority of people seeking new homes share the same suburban preferences despite providing no statistical evidence as such. And while Monte obliquely acknowledges the “liberal-type” weirdos on Streets.mn do not share these preferences, he rests upon a sort of silent suburban majority: ‘surely most people think like me.’ I’m not sure they do and I think the tide is turning, albeit incrementally, toward urban living.
The more important question is which pattern of development is sustainable and will produce affordable housing AND strong communities in the long term. To me that has to be denser walkable development, even in the suburbs, Expanding the MUSA is not part of that solution and continues the runaway pattern of growth that Strongtowns has done such a good job of documenting and criticizing. Surely the 8,000+ square miles in the MUSA is enough for our metro area; we just need to do a more efficient job of using our space.
Of course, Monte is still more than welcome to share his views, even if they are quite wrongheaded.
I have very little doubt that most people Minnesota think like Monte (which I say free of any statistics) and I think his contributions here are valuable for exactly that reason.
I should note that I never used the term “liberal type weirdos”, just acknowledging that there’s is a notable shift, at least among millennials, towards the city without judging their politics or normalcy. I have used the term “city type liberals” online but that was copypasted over here by someone else from a completely different forum without my approval, so it was never my intent for it to be brought up here, and was in the context about not liking people trying to impose an urban form on the suburbs.
Although I do accuse the MUSA line of contributing to this specific problem in the article, in this case the suburbs share plenty of blame with zoning and requirements for large lots and whatnot. Requiring big lots when there’s an artificially limited supply just doubly inflates the cost of a lot, and a house is typically a fixed ratio of cost relative to a lot.
Fair enough. Weirdos was my own friendly paraphrase. I don’t want to quibble about labels, but I think your wrong about the MUSA having a significant limit on the supply of affordable housing. Sure builders like to complain about it, but the government still is expected to step up and provide roads, sewer, and water. If the developers had their druthers, they’d develop every choice parcel from Northfield to North Branch and from Buffalo to Hastings. In order to do so, the Met Council, the respective county, and local municipalities would be loading themselves up with dubious investments in resource intensive sprawled out development that cannot cover the cost of their own infrastructure’s maintenance. The housing supply may get a temporary boost from building at the fringe, but we’d be loading our system up with liabilities and making a terrible financial decision for the long term.
I can agree about the zoning and lot requirements, though.
I want to respond directly to Monty. I feel l like you consistently erase me in your writing. You and I are the (approximate) same age, given that you name yourself as Gen X. I, a well-off person in my mid-40s, have a very very different preference for housing than you do. That’s true for your and my location preferences, our building type preferences, and our neighborhood preferences. As I read your writings, I feel like you’re demoting me to be a Millenial — and like you’re not a fan of Millenials means that really is a demotion in your mind.
It also feels like you clump all people often-referred-to-as-Millenials as being the same, when statistics shows huge diversity in the supposed cohort.
My request is that you speak for yourself, and not speak as though your preferences include everyone of your generation (THEY DON’T, and I don’t want you to presume you speak for me). And, on behalf of my many friends in their 20s and 30s, please recognize their diversity, too.
On the questions of generations, yeah, its not just millenials shifting toward the city, which I say as someone who would claim Gen X, if I have claim a label.
There are plenty of retirees living the downtown condo life too.
Page 16 of this document from the Met Council has some ideas on changing home ownership influences. Some of these are probably relevant to the question of why new homes aren’t being built at a lower price point: rising energy prices, shifting shares of wealth, and tighter financing.
We recently moved to a smaller town in Colorado and learned some interesting things that might shed some light on why developers typically do not build smaller homes. First off, utilities connections aren’t cheap. Our new hometown has set a limit for how far they will extend the boundaries and thus service, but even within city limits, the tap fee here is $40k. Also, undeveloped lots in town are few and far between. The cheapest one we’ve seen is $165k. With those 2 factors at work, most builders will tend to build the biggest house they can on a given lot, to maximize square footage and therefore their ROI. We looked into building a modest (1200 sq ft) home and it wasn’t cost effective. So we ended up finding a 10-year old townhouse which suits our needs quite well. However, we’ve also heard lots of horror stories from our new neighbors about sloppy construction and poor quality control by the developer, and the resulting fixes they have had to make to their homes, even as the original buyers. This suggests that the relative age of the home may not be an effective indicator of whether you will have maintenance issues. The quality of the builder’s work is much more of a factor than the date it was built. As much as we often compare homes to cars on this site, and link them together, the fact is that most homes apparently do not receive nearly the scrutiny during inspections that cars do.
Before zoning was introduced in the 1950s, what happened was what’s now known as “infill”. Lots would be subdivided with more buildings added. Houses would be built up to the lot line. Houses would have houses stuck next to them, forming rowhouses — each individually owned, they’re NOT condos, and they’re NOT multi-family housing.
This sort of organic development has basically been made illegal by most US zoning codes, although the surviving rowhouse neighborhoods are very popular.
according to the Bureau of Labor Statistics calculator, $30,000 in 1970 equals about $184,000 today, so your house costs slightly less, relatively, than it did back then. Which despite your negativity about “used” homes, makes sense – a well-maintained house shouldn’t lose much inherent value. http://www.bls.gov/data/inflation_calculator.htm
Star Tribune reported last year median house price was $192,000 which is not that much more than $184,000. http://www.startribune.com/twin-cities-housing-hits-5-year-high-median-price-jumps-14-4/240030371/
Someone mathier than me would have to figure this to be exact, but given that in 1971 (the earliest i could easily find) average mortgages were at about 7.5%, and in 2014 they were under 4.5%, a slight rise in sale price doesn’t mean much or any rise in actual cost on a debt-financed house. Mortgage rate information from Freddie Mac http://www.freddiemac.com/pmms/pmms30.htm
So maybe new homes are more expensive or are being built for the more affluent side of the market, but single family homes in general aren’t actually more expensive. Which might make the answer to your question “because we have plenty of houses at that price point.”
So I thought I’d address points that have been made about this article on Twitter.
On writing an article on why I don’t like pre-owned houses or multi-family housing: After I complained about how one-sided the articles on this site were, it was suggested (by the editors?) I become an author here myself, which I accepted. From the beginning, I decided articles with “why I like this or hate this” with no further points, if even appropriate, were going to be boring and pointless. So rather than say “I don’t like multi-family housing” I asked the question why we aren’t building affordable new single family houses.
It should be obvious why I don’t like multi-family housing. Every choice is a tradeoff. The downsides with multi-family- often no private laundry, shared walls transmitting noise and limiting windows, no private yard to use and dig a garden in, harder to get to your car, no discrete lot and house to call your own, and often no secure parking, are important to me. The upsides: No maintenance and usually in more walkable areas, are not important to me.
As for pre-owned houses, imagine buying a pre-owned car and the engine going out after 5,000 miles. If you buy a new car, you can pretty much expect it to be trouble free up to 100,000 miles. That same applies to pre-owned houses, except a new roof, foundation repair, or mold remediation is a lot more expensive than a new head gasket. The difference is you can buy a new car now for about what you could in the 1950s, so a lot of people are buying new cars. The equivalent in houses would be if the cheapest new car you could buy was a $45,000 SUV, the manufactures for whatever reason having completely stopped making small sedans and hatchbacks.
Do I have a dog or cat? That’s an odd question, but although technically owned by my sister there are three cats and a small dog, a Yorkie-Pom in the household. Over the years had three other cats, a beagle, and a sheltie. Being able to just open the back door to have the dog take care of business is another advantage of houses. Even a detached townhouse probably isn’t fenced, and a sheltie is pretty much untrainable as far as staying on your property.
On it being disingenuous to buy a pre-owned house and ride a bicycle for recreation:
First of all, the whole point of the article was about how the option of buying a new house has been completely removed for people like me. Also, this was a special situation in that we had been renting from our parents for years, and before that, living free as kids. So we had a pretty good idea what was or was not wrong with it. We’ll need to budget for a new roof in 15-20 years if we don’t get lucky again and have it destroyed in a storm and be covered by insurance, and the water heater is overdue to go out, but the two immediate biggies, the crumbling asphalt driveway and the water infiltration in the exterior walls, we got the purchase price adjusted. I know there’s such a thing as a home inspector, but you hear enough horror stories to know they often don’t catch everything. You could see the siding was cracked, but I doubt they’d realize that the entire exterior had to be stripped down to the studs.
As for riding a bicycle for recreation, I don’t find that atypical of suburbia. Most people I know here own bicycles and most people use them for recreation only. I generally keep my bicycle in the back of my car since I drive to the chain of lakes or Hyland park or someplace. I don’t see that as ironic or unusual any more than going another specialized place for recreation, like to Valleyfair to go swimming at the waterpark, or the North Shore for walking.
On being a Troll: I guess I expected that one sooner or later. Every time someone comes in with different personal viewpoints than the majority that accusation gets brought up. If you Google me you will find I’ve been a member of pro-roads internet groups (first the Usenet group misc.transport.road, then the forum AARoads) since their inception in the mid-1990s, so my views are authentic and not cooked up just to stir the pot. Similarly, people would come into these groups and use pejoratives like “sprawl” and advocate against highway expansion, and we’d accuse them of being trolls.
Secondly, is it typical troll behavior to write a four part article that could have stirred up greater controversy if I spent 1/12th the time on it and used different words? Or spend any time at all writing articles with zero controversy, like a gallery of traffic signal lenses. Or even that most people would support, like getting rid of 4-lane death roads?
On being a real life version of various “The Office” characters. I’ve never watched the show so I can’t comment.
On wearing sweatpants: Am I supposed to put on a suit to go to Walmart or to telecommute out of my home office? There’s rumors that other telecommuters at the company work in their underwear. (Obviously we don’t use video-conferencing). I simply don’t go to places where it’s necessary to look nice. If I’m going to a casual sit-down restaurant or to someones house I’ll at least put on nice jeans or something.
It’s also interesting what happens when you don’t need to drive into the office. People were moving hours away where housing was cheaper and space was greater. We even had people moving to other states since they only had to be in the office for a meeting now and then. Eventually the company put a kibbosh on that because it was a headache dealing with the tax implications; they said Wisconsin only, and then only for people that had already moved there.
Could you point out where on Twitter? I didn’t see any direct replies/comments to either Streets.MN, Bill, or Matt.
I just don’t agree that new houses are inherently better. And I don’t think comparing a durable good like a house against a depreciating one like a car is terribly enlightening.
Among other things, you can inspect roofs and foundations and the like in ways that you can’t inspect transmissions and the inner workings of an internal combustion engine. I’d also have more confidence in the build quality of a house that’s stood for a few decades than the quality of some new construction too. And there’s the rather important issue of location.
But a lot of people agree with you. We’re buying a house and my dad briefly attempted to talk up something new in the suburbs. Which is not happening.
Finally, it’s also generally a bad financial decision to buy a new car.
From the comments:
Jul. 16, 15
@holstj @vegasgal Liberals and city types hate people being able to live in single family homes (what the deride as “sprawl”) so much that does seem to be the plan.
You’re right monte, we hate your freedom. You really are so measured and nuanced in your views and not at all trolling anyone.
weirdly, I live in a single-family home that cost less than $200k!
And I was at a hair salon in Longfellow (I think? or maybe south of 50th is another neighborhood?) listening to another customer talk about her recent home buying experience – they wanted to be near the creekside trail, and within walking distance of the light rail, and have a certain number of bedrooms because they are planning on having another kid…and they found a single family house they could afford that fit all those criteria.
Evil, evil, walking and biking liberals.
South of 50th, you say? Hmm… sounds familiar: https://streets.mn/2015/09/16/live-closer-to-stuff/
Yep, right there.
Did you buy it new? That’s the whole point of the article, you can’t, in general (I know there are a few exceptions here and there), buy a new one anymore for less than $200,000. Unless we start building new ones in that price range again, eventually increasing demand for fixed supply of pre-existing houses is going to drive it up to $300,000 or even more, like it has in other cities.
Of course we didn’t buy a new house, because we wanted to live in an established, mixed-income neighborhood. But prices of new and old houses are linked pretty tightly – most people won’t pay that much of a premium for a brand new house, or you’d see a lot bigger dichotomy per square foot than exists.
Did you see my post about the availability of homes (in general, not new) at that price point in the Twin Cities? There’s absolutely no reason for developers to build new at that sub-$200,000 price point when that market is perfectly well served. It doesn’t take a conspiracy, just a profit motive and the underlying per-unit costs like utility hookups, which several people pointed out.
There was a ton of home building in that price point at points in the past when the market worked for it – in the ’50s when you had the glut of demand left over from the Depression and the war years, plus the huge expansion of mortgage availability, and then in some geographical areas in the ’70s again.
Well, I don’t hear liberal city types supporting building new single family homes too often. You don’t build new ones eventually the end result is your going to prevent some people from getting them, since there’s no slowing down of people moving in the area. More people + fixed supply means more people being forced into multi-family housing, those people that don’t want to live in one.
But I’m not measured and nuanced in my views, I’ve held them for decades ever since. And if you hate the freedom of living in the suburbs (which I admit might not be everyone’s definition of freedom), then at least you admit it. Maybe some people want freedom from cars and the car payments and such that go with it.
You’re free to live as you like as long as you stop expecting everyone to socialize the costs. But if the money train to support suburban growth (sorry, I mean SPRAWL) were to stop then you’d *really* have a hard time finding the affordable homes you’re looking for here.
Your ‘freedom’ comes at a cost to all of us, and some people who live in a more responsible manner that uses less money and resources to sustain their lifestyle are tired of bearing the brunt of it. We get far less for what we put in compared to suburbanites and all that we want is a little bit of equity for a change, but that’s unthinkable because the suburban development model requires tons of infrastructure subsidy to look like it’s workable and sensible.
So yes, I hate your ‘freedom’ because it costs me mine.
Seems like I’m doing quite a bit of subsidizing too. Like anyone that makes the lifestyle choice to have kids. I’ve seen plenty of families with multiple kids (from the city and suburb alike) that are on all kinds of government assistance, not just public education. Unless maybe you have no kids and live in a downtown high-rise and don’t use transit or a car to get to work, being a member of society means you’re subsidizing someone else.
Hi, Monte, I live in a downtown high rise condo, don’t use a car or transit to get to work, and have no kids.
Nonetheless, “subsidies” don’t quite work this way. I get real value from helping to pay for the education of other people’s kids. So too paying for transit so people don’t either drive and impose externalities on me or not be able to work and increase their dependence on subsidies.
And, of course, degree of subsidy matters quite a bit.
The price of subsidizing my bus use pales in comparison to the price of subsidizing your car use.
You just can’t accept that other people are paying for your lifestyle, can you? ZOMG WELFARE! BUSES!
None of it comes close to the suburban growth subsidy. The lost tax revenue from the mortgage interest deduction and the huge spending on extending infrastructure to the fringe for low density land use would make the transit budget look tiny. But we hide these things behind accounting tricks to make people think they’re earning their way and not part of a giant Ponzi scheme with public dollars propping up private ones.
As for children, while I have none, it’s pretty disgustingly selfish (this coming from someone who is admittedly selfish) to think that spending money on educating and raising children is a subsidy and not an investment in the future. Someone needs to grow up and pay for your roads when you get too old to drive safely and start plowing through farmer’s markets on your way to the old country buffet, right?
But hey, let’s just leave a smoking crater where the future should be so you can live in a single family house and drive everywhere because you’ve clearly arrived at the only logical choice for how we should do things as a society with scarce resources.
I would like freedom from having to live on anything less than 10 acres of woodland while also having the freedom of a high frequency subway line right outside my door.
Can you arrange a federal housing and transportation policy that allows for that?
Freedom is not a spectrum like you think it is, with single family suburban homes on the “freedom” end and literally anything else on the “tyranny” end.
I see no reason why as a “liberal city type” I should support the construction of new single family homes, much less affordable ones. As a fellow human being, I think you and every other person has a right to a clean, safe, and respectable dwelling unit. I don’t think anybody has a “right” to a single family home.
Everyone living on a 10 acre lot with subway service is going to be a lot harder than building single family homes for the working class again. We’ve never built subways by 10 acre lots. We’ve built whole cities of single family houses that are 1/3 the price of one built today on more compact lots today. Everyone can’t have everything, but if we changed the zoning, had more compact lots, and eliminated the MUSA line, a lot more people, maybe not now but in the future, will be able to have a single family house, so we won’t become like Portland or the Bay area.
And I’m well aware that freedom is in the eyes of the beholder.
Changing zoning to allow denser construction: Yes
Smaller lots: Kind of redundant but also Yes
Eliminate MUSA? NO! This will do nothing but encourage more big lot developments further and further out where it costs more and more to extend infrastructure. This is exactly the opposite of a solution. Or do you think the time of poors and the middle class is worthless and they should spend it driving 40-50 miles into town for a job every day just so they can have an affordable house? And the cost of extending roads/utilities out even further will either be socialized and paid for by everyone or push these back out of the realm of affordability if you actually roll it into the cost of the housing. Either way they’re going to cost more to support than equivalent development inside the MUSA (which is already too big).
I’m really not sure the MUSA is limiting the construction of single family homes. People still build homes outside it. Some fall into the “local sewer system” designation in places like Watertown, Belle Plaine, etc. Some are larger lot houses with septic systems and individual or shared wells for water. The latter are typically large subdivisions built by the same type of developers who build houses inside the MUSA. They often have HOAs that limit lot minimums and minimum home sizes (since they’re not often in a city but township areas, zoning rules don’t apply). People are clearly making the choice to live without socially-provided sewer and water, so the Met Council isn’t keeping them fro that dream.
According to Myron Orfield’s data, between 1970 and 2000, population outside the MUSA grew by 130% while population inside it grew by <40%, and in 2002 10% of the region's population was outside the MUSA. Even with that said, the MUSA has definitely expanded in square mileage since its inception, although at a slower rate than regional population growth.
In any case, a single family home on an 1/8th acre lot in Cologne is not exchangeable with one in Minneapolis or even Bloomington. Job accessibility is different, transportation costs are different, etc. Building affordable single family homes is not a goal unto itself, we should be focusing on making housing + transportation more affordable for a variety of household types (singles, DINKs, full families, seniors). I'm not really sure expanding the MUSA much is a good idea until we've at least made building other types of denser housing in all existing MUSA municipalities by-right in many neighborhoods. Even if we did expand it, the market would surely be demanding homes with lots at scales that put a strain on everyone else paying into the shared costsshared costs of water treatment infrastructure. That is, unless you like the idea of a Met Council that tells cities and people how big their homes and lots can be. I doubt that’ll go over well.
I want to push back on the notion of fixed supply in two ways.
First, I had reason to venture farther out in the suburbs than I usually do, driving down 77 through Apple Valley and hanging a left to what I guess is technically Rosemount. We drove past quite a bit of new(ish), apparently fairly modest homes (apparently, as I do not know what they actually cost). Obviously “newish” is squishy, as what I was looking at might be as much as ten years old, so yeah, doesn’t entirely refute your point.
But I’d argue that an affordable single family home isn’t defined entirely by the features of the home. Minneapolis and the first ring suburbs have hordes of homes built in the 1940s with nearly identical floor plans and asking prices varying as much as below $200,000 to over $450,000, depending on location, condition, and degree of upgrades. The same sort of sorting is going to happen with suburban homes as well.
I know too that there’s some new single family houses being built in the city that are affordable, my guess is the small, cheap lots don’t exaggerate the price of the house that needs to be built, and in a neighborhood of existing houses the target market isn’t someone that wants a McMansion. But these are rare enough to make a dent in the supply situation.
it’s really hard to build new on city-sized lots because of setback and other rules that are new since the lots were sized. Political work to get that changed seems to wax and wane, depending on the housing market. It seemed for a while in the early 2000s that all the holes would get filled in, and then the housing market crashed and that stopped.
You could still move out to Isanti or Big Lake and get a brand new $200,000 house – maybe you should find out from these folks how it’s possible. http://progressivebuildersmn.com/homes-for-sale/
Having commuted into downtown Minneapolis from Big Lake – and worked downtown with a woman who did that commute with an infant and a toddler at home – I’m going to go with “most people don’t want to live that far away because the commute is brutal and expensive”.
But there’s a lot of empty space between here and there – maybe all those municipalities think it’s a bad bet to zone for lots of low-cost single-family, since there are big road and sewer costs and not a lot of tax return on them. Or maybe the demand just really isn’t there.
I’ll just point out that for most of history, buying a “stock” new house was not an option for 99% of the population. These were your options:
(1) Buy an existing house.
(2) Build your own new house, custom.
(3) Have your feudal lord build a house for you.
#2 was largely done by the rich, but was also done by settlers in frontier areas.
The era of “developers” only started with the Industrial Revolution, and it’s weird in many ways. For most of the era of developers, they built mostly factory-worker housing — which was considered the worst sort of housing and quite undesirable by people in the middle and upper classes. The mass production of suburban housing in the 1950s is an *aberration*.
Another little point:
Houses which were either built or renovated by the owner-occupier, or even by a landlord catering to the well-to-do, are usually higher quality than new houses which were mass-produced by developers (who never had to live in them or pay for maintenance) for a quick sale. “Used houses” from the 1910s, mostly originally built custom, but some built as factory housing, still command huge prices, and for good reason.
I don’t think new single family detached housing will be a big part of the affordable housing solution in the Twin Cities. Affordable undeveloped land just isn’t that prevalent within a reasonable distance from job centers.
On the other hand, multi-family housing lowers living costs in ways SFH cannot such as lowering heating bills thanks to shared walls, shorter commutes, and economies of scale discussed in other comments. I think an effective affordable housing policy would involve zoning changes to encourage rather than prohibit rowhouses, getting rid of parking requirements so developers have the option of forgoing the expense of off-street parking, up-zoning areas well serviced by transit, and providing incentives to developers that that put a portion of their units in an affordable program.
I made a comment with a bunch of links in it (sources for median price, change in dollar value over time, stuff like that) and I think it’s held from posting for the links – can someone let it out?
Done. Apologies. Our comment filter moderates things with links.
Thank you! I figured it was just the filter.
I think Monte raised an interesting question with this post and I appreciate reading posts presenting different points of view. So, thanks for your work, Monte.
I know quite a few people who bought town homes for their first home purchase when they “preferred” single family homes. They bought what they could afford before they had kids, while intending to move into a single family home once they could afford the home the wanted. Most of those town homes were pretty nice, attached garage, high end finishes, and of course, laundry in the unit. Town homes serve the market for smaller homes and do it well. I lived in my share of shitty apartments as a student and young adult, and these town homes are not even in the same category. I think these town homes fill the space in the marketplace that small single family homes might otherwise.
To me, this article came off as in good faith and something that belongs on this site (despite some unfortunate word choices).
On the issue of “used” homes:
This is just anecdotal, but the people in my life have had many more problems with new construction than “pre-owed” homes. I actively prefer the later. Why not give a previous owner the chance to work the bugs out? (This is actually my philosophy with cars as well, but I digress). But what I am really trying to say is: I don’t think assuming a new house will take longer to require a major repair is a good assumption. Major repairs are a part of home ownership that everyone should be prepared for. That fact then naturally leads to questions like those in this article: Is the available housing affordable, particularly if a buffer for repairs/job loss/vacations is included? I think it also leads to questions about whether the way we currently think about housing is reasonable and whether we should move away from thinking that owning a single family home is the best option.
I bought a house in 2008 which had been built in 2003.
I have had to replace:
(1) all the appliances except the refrigerator
(2) all the DOORFRAMES
(3) the ventilation system
…and my house is actually more solid than average; the ‘bones’ are good, though the finishings were terrible.
Developers often build crap. It’s actually very, very important to do a thorough home inspection in detail whether the house is new or used. The new house may be worse than the house lovingly maintained for 30 years.
It’s straight off the Ryland Home web site. (Based on a house with absolutely no options- not the one in the photo or any that are built without an order- as which I’ve noted are always packed with options, 20% down payment, 4.125% interest rate, and 30 year fixed mortage
Is it accurate, I don’t know. It’s not like I’m going to knock on random doors in that development and ask what their house payment is.
Monthly payments should always include taxes and insurance, if not an estimation of maintenance/upkeep costs over a 30 year period (this is tricky since newer homes are less likely to require repairs or updates up front on a new spec-home than a 15+ year old home bought used). Also, the assumption that a cheaper home geared towards first time buyers would be bought with 20% down is a bit pie-in-the-sky IMO. So, add in higher P+I costs plus mortgage insurance until 20% equity has been reached. Further, the down payment should be included as a net present value spread over each monthly payment for the duration of living in the home.
None of this is to say that buying a home is a worse financial decision than renting in every case. Just that we shouldn’t claim that figure when the alternative (rent) includes taxes, building insurance, maintenance, etc built-in.