Chart of the Day: Visualizing Our Backlog of Home Building

Many people have observed on this site and others that we’re not building enough housing in the United States, and that this has a significant impact on affordability. Housing lasts for a long time if properly looked after, so if the population and people’s household arrangements don’t change, we don’t need to build much housing. Neither of those things have been true in the United States however: the population has more than doubled since 1960, and as the population has aged and gotten richer people have tended to live in smaller households.

To get a sense of these changes, we can use the Federal Reserve Bank of St Louis’ fantastic Fred data site, and use just two series: the annual number of private units of housing started and the annual change in the population. From 1960 to 2000 for each additional person in the civilian population we built 2/3 of a housing unit. Perhaps it’s easier to think about it this way: for every 3 new people 2 housing units were built. Since 2000, we’ve built significantly less housing for each new person, for every 3 new people only 1.5 housing units have been built.

For the Twin Cities metropolitan area easily accessible data only goes back to 1988, and with relatively small numbers annual change is a bit random. From 1990 to 2010 we added 0.45 new housing units for every new person in the metropolitan area. Since then we’ve only added 1/3 of a unit for each new person. The average household size in the United States is about 2.5 people, so we’re probably not adding enough houses to house people the way they want to live.

The story is pretty similar in the Twin Cities as it is in the nation. Compared to forty or fifty years ago we’re building significantly less housing. Even compared to a decade ago, we’re building about 20% less housing for every new person than we did in the 1990s and 2000s.

America is a big country so we build a lot of housing, we just don’t build nearly as much as we used to house our growing population in the style they would like.

 

 

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3 Responses to Chart of the Day: Visualizing Our Backlog of Home Building

  1. cobo Rodreges August 14, 2017 at 4:21 pm #

    At least for single family houses the cost for construction is getting out of control, which can help explain why the pace has slowed down.

    I think that the main reasons are

    1. more stringent building codes, There are many expensive steps that are mandatory now that were not needed before. I’ve heard from some relatives who run a housing development that its virtually impossible to build and sell a new modestly sized house in their small MN town for under $300k

    2. And unlike making most things home construction hasn’t gotten more efficient over time. So the natural normal costs increase faster than inflation.

    Also virtually all single family home construction is done in large private developments which are very monotonic in design. Which limits interest in new expensive homes. (I know I don’t want to live in a neighborhood where every house looks the same).

  2. karen August 14, 2017 at 5:40 pm #

    I think condos will more and more be the first home many young people own – rather than small starter home – Levitt Town style. Condos can be built for reasonable starter price per unit and spread out high land cost better.

    • cobo Rodreges August 15, 2017 at 10:11 am #

      Yeah I agree but they are also really expensive build. I have heard some anecdotes but I don’t know the market well enough as to speculate why.

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