U.S. Housing Starts Fell 4.0% in July - WSJ

17 Replies

I came a cross a recent article in the WSJ

Workforce multifamily housing for people between 80-120% of Area Media Income is probably the most needed type of housing in America, yet given land costs and construction costs, it is really difficult to make a deal work without government or non-profit type subsidies. 

WSJ says in this recent article that "despite historically low mortgage rates and rising wages, the housing sector has been strained by a low inventory of affordable homes propelled by rising construction costs and lack of land." 

Even though this article was referencing single-family home inventory, the same is true for multifamily housing. Perhaps a different tax credit program other than the low-income housing tax credit program should be established to address this increasing need, yet that type of program would be a drop of sand in the ocean regarding the overall need for it.

Thoughts?


in our area new construction MF has been booming but I think there is going to be an over saturation and some softening in rents and profromas with some partnerships stressed by not meeting the DCR requirements.

as for SFR its well not a Joke but it is a joke

by the time our government with all the rules and fees. it will cost us almost 100k per lot before we go vertical and not including the price of the dirt.. and affordable in our market would be new construction under 300k virtually impossible to provide that product under the current regulations .. then you take in the fact of tight labor and sub contractors jacking their prices for the last 5 to 7 years and well at least in our market you have to be north of 400k to have any hope of a profit on a new build SFR.

Infill is not a lot better given that lot prices are 100 to 300k per in the markets we work  which is Charleston and Portland.

used to be we could get infill lots in Indy for example for 20 to 40k those have doubled or more.. instead of buying rentals a few years back the better play would have been to load up on lots in these areas that are transitioning appreciation has been over 100%  .. 

@Jay Hinrichs it's a crazy situation. Is multifamily going to be the only alternative, or govt provided housing?

With the cost of construction that you mentioned, it doesn't seem feasible to make affordable housing in most markets.

I think there are a lot of variable.  Where I am there are still lots of new houses being built and they are affordable for many people.  You are always going to have people who don't own homes, some because they don't want to, others because they are starting out or just moved to town and want to learn the neighbourhoods and another group who will never be able to afford homes-not because of their income, but lifestyle choices.

I also wouldn't focus on the numbers reported by media because they can spin them however they want to sell their story. 4% compared to last year, last month, average over the last few years, looking at SFH only, what areas, etc.

Originally posted by @Yonah Weiss :

@Jay Hinrichs it's a crazy situation. Is multifamily going to be the only alternative, or govt provided housing?

With the cost of construction that you mentioned, it doesn't seem feasible to make affordable housing in most markets.

MF in Portland these days are all up scale and cost 400 a foot to build.. and rent for about 2 to 2500 per 1K sq ft. 

govmit wants affordable housing they need to open up the tax credit vaults.. also in this market  a new ordinance pass requiring a certain amount of low income units per project there was a rush to get projects through before the ordinance and since that time new projects have dried up to a trickle.

 

In the Bethany area a Canadian builder some years ago built multigenerational housing that is common in Canada. A friend's family bought one for the mother and granddaughter. It basically has the same entrance open to the main floor but stairs down to a complete unit perfect for mom. Family can easily share meals. 

Most gatherings are downstairs in Mom's unit which is plenty big enough for company.

We are behind in our thinking that each family needs 3,000 sf. We are the only ones in the world that have huge houses for the masses. 


Originally posted by @Jeff S. :

In the Bethany area a Canadian builder some years ago built multigenerational housing that is common in Canada. A friend's family bought one for the mother and granddaughter. It basically has the same entrance open to the main floor but stairs down to a complete unit perfect for mom. Family can easily share meals. 

Most gatherings are downstairs in Mom's unit which is plenty big enough for company.

We are behind in our thinking that each family needs 3,000 sf. We are the only ones in the world that have huge houses for the masses. 

Jeff:  You are not alone.   The are plenty of suburbias in Canada brimming with 3000 - 4000 sqft "McMansions"   The split-level, multigenerational does occur (at least here in the east), but its neither the norm, nor universal.

 

Originally posted by @Jeff S. :

In the Bethany area a Canadian builder some years ago built multigenerational housing that is common in Canada. A friend's family bought one for the mother and granddaughter. It basically has the same entrance open to the main floor but stairs down to a complete unit perfect for mom. Family can easily share meals. 

Most gatherings are downstairs in Mom's unit which is plenty big enough for company.

We are behind in our thinking that each family needs 3,000 sf. We are the only ones in the world that have huge houses for the masses. 

some of the builders in PDX are offering dual living plans right now I am toying with doing one on our Canby community.. being that a lot of the sales in that area are to empty nesters moving away from urban core  or moving off of their small to mid size Willamette valley ranch 

 

The nice thing about a second suite in a home is you can either rent it and have it help pay your mortgage or have it as a multi-generational home.  I saw a place for sale the other day with two suites in the basement-both really nice, well laid out and if someone was to live upstairs, the rent from the two basement suites would more than pay their entire mortgage and taxes.

Originally posted by @Jay Hinrichs :
Originally posted by @Jeff S.:

In the Bethany area a Canadian builder some years ago built multigenerational housing that is common in Canada. A friend's family bought one for the mother and granddaughter. It basically has the same entrance open to the main floor but stairs down to a complete unit perfect for mom. Family can easily share meals. 

Most gatherings are downstairs in Mom's unit which is plenty big enough for company.

We are behind in our thinking that each family needs 3,000 sf. We are the only ones in the world that have huge houses for the masses. 

some of the builders in PDX are offering dual living plans right now I am toying with doing one on our Canby community.. being that a lot of the sales in that area are to empty nesters moving away from urban core  or moving off of their small to mid size Willamette valley ranch  

There is a guy here on BP @Scott Choppin who is developing such multi-generational housing in L.A. This is potentially a great option going forward within a lot of communities.

Originally posted by @Yonah Weiss :
Originally posted by @Jay Hinrichs:
Originally posted by @Jeff S.:

In the Bethany area a Canadian builder some years ago built multigenerational housing that is common in Canada. A friend's family bought one for the mother and granddaughter. It basically has the same entrance open to the main floor but stairs down to a complete unit perfect for mom. Family can easily share meals. 

Most gatherings are downstairs in Mom's unit which is plenty big enough for company.

We are behind in our thinking that each family needs 3,000 sf. We are the only ones in the world that have huge houses for the masses. 

some of the builders in PDX are offering dual living plans right now I am toying with doing one on our Canby community.. being that a lot of the sales in that area are to empty nesters moving away from urban core  or moving off of their small to mid size Willamette valley ranch  

There is a guy here on BP @Scott Choppin who is developing such multi-generational housing in L.A. This is potentially a great option going forward within a lot of communities.

Well It certainly would work in certain minority communities were they don't put the parents into rest homes. 

 

Large multifamily building seem to be going up all over here.
Affordable SFR's? I don't think there is any such thing in LA these days, at least not new construction. Even new condos are expensive. Cheaper stuff does not pencil out, but the city does try to incentivize builders to add "low income" rental units. If you add those, you can build more units.

I think the mother in law suite is the way of the future.  On custom in the last couple years I would say 20% had the option.  I don't build custom any longer, but its in super high demand.  

I personally think if you found a great location sub that would be the way to go.  Put a club house up, golf carts and make it like an small town like you see in florida all the assisted living would be in for a world of hurt.

Here in Chicago and it’s subrubs. MFHs are outrageously expensive. Even private owners are selling for a obscene price with the property usually needing a ton of work. The funny thing is there are usually many cranes in the air downtown. Along with them being across the city as well. It makes me also wonder how commercial real estate will be here.....

i have noticed a recent trend in my tenants investing in Philip Morris and anheauser Busch corporation . Seems They don’t seem to be affecting by external trends and they are the ones paying me so why should I ? Last I checked everyone needs a roof over their head .

I think @Jay Hinrichs is very accurate in pointing out the major costs of new construction. This is why I’m such an advocate of cheap, old, stick built homes as SFRs when you can find them in appreciating markets. There is simply no replacement stock coming on the market below the silly prices jay is talking about. I get annoyed when people blame “material costs”. The number one non-market related cost these days is simply government rent seeking throughout the build chain and superfluous revenueing through permitting. There is no reason anyone would build “affordable housing” given the inordinate fixed cost to break dirt. The government is now putting builders in a position that forces them to allocate high-end units as subsidized affordable housing. Guess who is going to pay for the net loss on those units?

@Jay Hinrichs

Your description of SFR new construction in PDX sounds more or less like the same situation in the growing edges of the Atlanta metro area.

Only new construction I’ve noticed that was under $400K have been zero lot line on slabs. Basements are not penciling out on new construction. Builders are focused on $400K and up in order to make a profit. I think really $500K and up is more accurate.

Affordable housing in the Phoenix metro area is going away. I have been looking for a 4 plex for my son and I to buy while he's in college and based on the rents of the properties I'm finding 3 units are not paying the mortgage. Values have skyrocketed but for many properties rents are the same. I'm not sure how new buyers can profit on a 2-4 plex. I started questioning my math and based on several investors I spoke with they agree 2-4 family is off the table for them in this area. While I'm not completely in this market, I struggle knowing there are probably good families being pushed out because there is no longer affordable housing being constructed.