Land

To Get Out Of Housing's Echo Chamber ... How About A Plan?

It would be naïve to think there is an argument that will win over most of these folks. But we need to convince some and at least lessen the negative passion of a material proportion of the rest.

Land

To Get Out Of Housing's Echo Chamber ... How About A Plan?

It would be naïve to think there is an argument that will win over most of these folks. But we need to convince some and at least lessen the negative passion of a material proportion of the rest.

May 23rd, 2023
To Get Out Of Housing's Echo Chamber ... How About A Plan?
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Have you ever actually seen a PLAN to solve our housing problems? In any city? Neither have I. I have read a lot of vision statements; problem statements, needs assessments and “calls to action.” But not a plan. A plan would have some basic components – problem definition and data, goals, strategies, and tactics.

Problem Definition/Data

The one part you have probably seen are calculations of shortfalls, which amount to problem definition. While these can be controversial in specifics, the basic math is straight forward.

For this column, let us use the Denver MSA as an example and keep it simple. Roughly 40,000 job growth annually over more than the last decade, with about 22,000 annual permits. Most economists estimate that a healthy market has 1.25 jobs-to-housing ratio. That would require about 32,000 permits a year (the demand side).

Do we have the approved land to do this? Those of us in the business intuitively know the answer is no. But if we are going to fix things, we need to know what we have and what the shortfall is. This is no simple task, as we would have to study conversion rates of property types, zoning, water, sewer, infrastructure, etc. But how do you plan without knowing what your resources are? And while it would be a lot of work for municipalities, how can they justify not knowing this? With modern GIS systems, it is not insurmountable. With this completed, we would know what we have to work with (the supply side).

There is a precedence for this.

Goals

Therefore, our goal, might be to increase annual production by 10,000 units. We should further break this down into price points and geographies. New permits in the Denver MSA are roughly a 50/50 mix of single-family and multi-family over the last decade. If we studied charts of housing markets around the country, we would find that those where the majority of new housing permits are multi-family, are even more expensive than Denver. Probably not what we want to copy. So, another goal might be to achieve the increase and maintain the 50/50 ratio. Providing a range of product options for our population.

Sub Goals

But leaving it at that level of detail, would only be a start. What proportion could be accessory dwelling units, infill townhomes, mid-rise, high-rise, single-family medium density, single-family low density, manufactured housing, etc.? Would a couple of product types suffice? Would we need all? The mix would presumably be based on a combination of price points we are trying to achieve as well our existing and possible infrastructure. To be clear, this is not meant to be central planning where government determines what belongs on each parcel in a region. But it is necessary to inform broad, proactive general plans and is indispensable at a high level of infrastructure planning and construction.

With our single-family/multi-family mix, target price points, zoned property, and infrastructure analysis in place, we could shift our focus to the tactics to accomplish our goals. We will need to entitle more property, so what might entitlement reform look like? How might we fund necessary infrastructure? Not by developers one project at a time, which is so inefficient, but a region wide approach?

Tactics

We will have to sell all this to the population, a task we have clearly not mastered to date. I think here, we need to stop denying human nature. We have failed in our economic sales pitches – jobs/housing balance, jobs multipliers, economic growth, etc. We have also failed in trying to guilt people into it.

We are further challenged by the asymmetric warfare we are in. Our opponents, NIMBYs, BANANAs and CAVEs have very specific targets and believe their way of life is going to be harmed by new development. Those who desperately need the housing do not connect their well-being with any one project. Afterall, it is years away from being available and may not work for them specifically.

As to the anti-building crowd, let us face it, most people do not directly connect their livelihood to economic growth and home owners know if they prevent more housing units, the value of their home will likely go up. So, time to work on our arguments as to why it is good for them. Good as it will pay to fix their potholes, expand their school, and remove the trailers, allow their kids to live nearby if they want to, know their waiter or waitress by name, etc. I am not saying it is easy, or that the above is the right answer, but we will need to sell this and ignoring selfish interests is not working. It would be naïve to think there is an argument that will win over most of these folks. But we need to convince some and at least lessen the negative passion of a material proportion of the rest.

For those we are trying to help, one of the hardest tasks will be thinking through what do we do for people in trouble now? If we did everything above right, it would take years to gear up the system to do all the above. If we are to rally support, we must pair long run solutions with short run help. What might that look like?  I admit, I do not have an answer for that. Short term “solutions” are hard to come by. Rent control will discourage the very housing we are trying to get built.  Providing renter and down payment assistance largely just raises prices.  Increasing demand is no way to tackle a supply problem. But we will not have a winning argument if it's “trust us, do it our way, and five years from now you’ll see improvements.” Perhaps a creative approach to temporary housing – think about the problem the way we do with housing after natural disasters? Housing for an interim period while we re-build (or in this case, build). We need more ideas in this area.

Conclusion

It can be discouraging, because there are so many challenges herein. Not to mention just getting people to agree on the goals feels impossible. But it is critical.  If, as in this example, we do not agree we need 10,000 extra units a year, or conclude based on the analysis of inventory, infrastructure, and possible entitlement reform it is not possible (at least with sacrifices the public is willing to make), then let us agree on what we can do. If it is, say 5,000, then can we go back and look at our economic growth goals and programs and scale them back or eliminate them? Offering jobs incentives with no intention of allowing enough housing to support the demand is wrong. Unless we truthfully are hoping to get some people to leave so others can arrive and pay more. Seems a harsh approach to our existing community members.

Without a plan, we are just tossing around ideas and virtue signaling. There is no way of getting to where we need to without quantifying both the need and the solutions. And ground-truthing them against resources.

No plan = no accountability = nothing gets done.

How about a plan?

ABOUT THE AUTHOR

Scott Cox

Scott Cox

Principal, SLC Advisors

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ABOUT THE AUTHOR

Scott Cox

Scott Cox

Principal, SLC Advisors

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The combination is Misawa's second U.S. market inroad, having completed a similar deal to take a majority interest in North Texas operator Impression Homes in December 2018.


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