The Expert Podcast

Unless you've been living under a rock you've known that there are problems with the housing market in the United States and some people think it's a pricing problem some people think there's not enough houses some people think there's inequality but in reality the bottom line is that there's just not enough houses there's not enough residences for people to live in there's estimates that the shortage is about 5 million residences for people to live in um some people say too some people say six or seven but you know roughly four or five million homes are short versus the number of people that want them.

This is a great article from Insider where it talks about how the housing shortage is the root of all of America's problems. They're not only talking about the housing problem; they're talking about everything else; they're talking about homelessness; they're talking about income; they're talking about jobs; they're talking about the economy. Everything has to do with housing, and the argument they make is that because people don't have secure, affordable housing, it creates all these other issues: inequality, racism, and everything else.

And they talk about the reason why there's a housing insurance so if it's true that there's not enough houses why is that the case well the easy answer is the US hasn't built enough homes in recent decades and the shortage is among the reasons homes are affordable for many people well why is that why isn't there not enough homes built obviously like most Industries it's supply and demand if people want houses why not build them just like if there's a shortage of cars the price is going to go up and the manufacturers build more.

Well the reality is there's more to building a house than just people wanting to buy them you also need to have the three or four other factors that go into building a house you need to have the capacity to build them and the permission to build them that's the key there are plenty of Builders right Builders want to build stuff as a general contractor we want to build things it's not like we want to sit around doing nothing all day we want to build things we want to get out there and dig in the dirt and construct Framing and pour concrete and put on roofs and do interior work we want to do all that stuff so the more jobs we have the better why aren't there more homes being built well the first thing we need is property to build on right so if you're going to build a house you need a piece of land well there's actually plenty of land there's land out there the question though is can you get a permit in zoning and approvals to build on that land.

If you're building a house out in the middle of nowhere away from population centers it's relatively easy to get permits and zoning and approvals to build a house the problem is that's not where most people want to build a house and live in a house they want to be in and close to communication centers and employment centers in those areas it's much more difficult to get zoning and approvals because anytime you're building a house close to another house there's going to be pushback the person even that lives next door likes that empty lot next year so they may push back and it may be more Global than that it may be that the town doesn't want to build more houses or want to improve your construction.

And if they do they're going to have a lot of restrictions on that development and those restrictions might be things like you can only build so big of a house it also might be Financial in many cases the permit fees and the approval fees might put the cost of the house Out Of Reach for the buyer you want for example in some areas of California all the permitting and approvals and and application fees can add up to 150 to 200 000 before you even break ground that has to be added on to the cost of the house so now whatever your house cost is you have to add 200 000 that might price It Out Of Reach for affordable homes the other thing that may happen is the approval process may take a long time in rural areas in some counties you can get a permanent approval done in 15 to 20 to 30 days you could be digging your house in in um in uh building very very quickly there are areas in parts of San Francisco where it might take two years to get your approvals done in that period of time you have your carrying costs you have the uncertainty that it's going to get approved you may have to change your plans there's also in many parts of the country the ability for third parties unrelated to your development to object to it in California anybody who could come forward and say we don't like this project because of environmental or um the the uh you know some species it has to be protected or the quality of life in that neighborhood and they can file a lawsuit and block that property from being developed.

The bottom line is that Builders want to build there are a lot of obstacles financial and otherwise to get more properties done there are certainly answers that could be put on the table that could get more properties done tomorrow there still is one new obstacle to building more homes which is Workforce right so even if you're a builder and you get approval to build a thousand homes and you have all the real estate and you have all the lot work done it may be difficult to get the quality and volume of employees of of um skilled trades people to do all that work just because the workforce has been deteriorated over the last couple years that can be probably overcome if you're a very skilled manager and very skilled at prop project management and efficiency but it will make it a little more difficult than it was a few years ago so this real estate crisis has a lot to do with the volume of construction and general contractors can solve this along with cooperation with government agencies property owners and even the employment industry.