Are we headed toward a housing reckoning?

Last week, I reported on the housing challenges facing Gen Z (and other generations as well).?This week, I go deeper on the topic with Anna Staver, the host of All Sides on public radio station WOSU in Columbus, Ohio and the host of a great new podcast series called Untangled: The Housing Crisis. It is a deeply reported series on the housing challenges facing Ohio and the country, but my conversation with her focused on the specific issues facing Gen Z and young Millennials. Spoiler alert: the situation is complex, and solutions will require heavy lifting at every level of government, but there is some hope that things will change—in part because advocates are on the case, but also because they have to change—and soon.?

1. So can we just start building more starter homes??

Last week I talked about how access to small, low-cost homes could help create needed home-buying opportunities for younger folks… and how the majority of new builds today don’t meet that criteria. There are many causes for the steep and rising prices of housing: the price of land, housing density, inflated costs of building materials and much more, but Anna told me that the biggest barrier to the development of sufficient affordable housing is local zoning regulations, that are hugely decisive towards what can or can’t be built, and consequently how those properties are priced and taxed. “People always forget that [those in] the smallest government are the ones that most impact your day to day lives,” says Anna. “We all have different views on who's gonna be the president, but who's on your city council? They decide all the zoning, right? They decide what's real and not. And if you have an HOA, that’s even more granular.” Historically, zoning practices have been employed by affluent communities to boost property values, decrease tax burdens, and often disrupt the influx of non-white residents. While few municipalities would lay claim to these goals on paper, many of these same practices persist today, as homeowners who financially benefit from higher land prices leverage their political influence at the local level to lobby for zoning laws protective of property values—in turn dramatically inflating housing costs. Anna shared a story of her husband’s role as a member of the local planning commission, where he worked on mapmaking and land use analysis for their community, but the contentious debate of the meetings discouraged him from renewing his position. “It was just a parade of people screaming about whatever was being built near them,” says Anna. “It's NIMBYism … ‘we don't need affordable housing in my backyard.’”?

Opportunities for affordable housing start on the community level, and will require advocacy at that level if things are going to change—but moreover, if we’re going to turn screaming matches into productive dialogue, we need to shift how we’re thinking about and discussing the varied housing needs of our community members. The reality of the situation is that creating affordable housing opportunities for those with fewer financial assets, such as young folks, will have to start in your backyard—but working with your local government towards this goal can mean both your needs as a homeowner and the needs of prospective buyers can both be met.

2. Generational wealth & financial planning play a huge role in securing housing.

In a Credit Karma report from this past March, 38% of Gen Z homeowners said they receive financial assistance from their parents to purchase their home. Among those who weren't yet homeowners, 44% said they planned to get some financial support from their family to make it possible. The reality of the situation is that we should expect this to continue over the coming decades as costs rise, as Anna explains, “it really turns into a case of the haves and the have nots.” Young folks whose families can offer financial assistance will increasingly rely on those assets to be able to buy a home, while those without the financial boost from their family will have to postpone buying a home until they can save enough for a downpayment, home prices come down, interest rates decline—or all of the above.?

There is a slight upside to the situation, in that it encourages a transfer of wealth and more sustained openness about family wealth and finances from Baby Boom parents to their Millennial and Gen Z children, but it still leaves a great swath of people without those same assets. It also has vast implications for future parents and parents of young children, as Anna discussed how we’ll likely need to start putting money toward our children’s home buying funds in the same way we save for their college. “I did the math on [my house],” Anna explains. “So I have a third grader and first grader, and by the time my kids are out of college [my house will be valued at] $1 million or $1 million plus. And I'm like, that's that's insane, right? … Don't get me wrong. I'm very happy with what we bought. But, like, if I'm lucky, if, you know, 12 years from now, it's a million bucks. I mean, I don't know how my kids will ever buy a house.”

3. A reckoning is coming.?

All things considered, we’re not at a tipping point yet: home ownership rates in the US are down significantly from their peak in 2005, but remain fairly pretty consistent with what they've been over the last 50 years and are generally higher in the US than other developed countries. But that also doesn’t mean affordability and access is not going to continue to be a problem as more young folks finish school, enter the workforce, and get ready to have families of their own. According to a RenoFi report from October 2020, the average price of a single-family home in the U.S. could reach $382,000 by 2030, and for places like San Francisco, Los Angeles, and New York, soar into the millions. Simply put, it’s not affordable, and increasingly less so. “In some ways it’s like global warming,” says Anna. “We all know it's a problem. And if we don't fix it, it's going to get a lot worse.” Her bold prediction for the future? Change will come—because it has to. “We're headed for a reckoning in some way,” she states. “I'm not 100% sure what that's going to look like, I don't know if there'll be another downturn, because I don't feel like it's overheated. I think it's supply and demand issues to a certain extent. It's so unsustainable that if we don't make changes, there's going to be some sort of reckoning.”

My hope is that Gen Z will helm the changes that they need to see, but until then, advocates at the local level are already working to make a difference for the folks who need it most. Research has shown that down payment assistance can make a world of difference, especially as costs continue to rise. According to the Urban Institute, in 2010, $10,400 would have covered a 5% down payment on the median home purchase, whereas now, a borrower would need $22,240 for the same 5% down payment. Seeking to address these rising costs, Anna described a new Ohio-based organization that contributes $15,000 grants for people of color to put toward their down payment costs. And it’s certainly not the only one: the number of U.S. homebuyer and down payment assistance programs continue to grow, with 2,362 total programs now available across the country. Meanwhile, on the federal level, Sen. Sherrod Brown (D-OH) proposed a bill last year called the HELPER Act, which would create a first-time homebuyer loan program to benefit teachers, law enforcement officers, firefighters, EMTs and paramedics.?

None of these ideas are complete solutions, but the fact is that the more folks that pay attention to this issue, the more pieces of it we’re able to address. “No one thing is going to fix it,” Anna reminds me. “So just building more houses will absolutely help, but then we have to address the cost of college, and the cost of childcare, and zoning rules, and density. It's going to take a multitude of ideas to fix it.”