Challenges in the Housing Market and Current Developments
CONWAY GITTENS: How do you assess the current condition of the housing market?
KYLA SCANLON: The housing market is quite fascinating. I had a conversation with Wally Adeyemo, the Deputy Secretary of the Treasury, regarding the Treasury’s initiatives to tackle the significant challenges we face in the housing sector. He pointed out that we simply do not have enough homes. This encapsulates the primary issue in the housing market—we have properties in different locations, but not in areas where people actually want to live. It’s essential to plan around economic hubs, isn’t it?
The housing crisis is generating a lot of dissatisfaction among individuals. Mortgage rates are exceedingly high due to the Federal Reserve’s rate hikes aimed at combating inflation. Additionally, the shortage of homes stems from a reluctance to build after the Great Recession, and now with elevated rates, builders are hesitant to construct again. This has resulted in a perfect storm of insufficient housing, soaring rents, and numerous complications.
Strategies to Enhance Home Affordability
CONWAY GITTENS: Home affordability in the U.S. has deteriorated to its lowest point since 2007. What do you believe is the solution to this dilemma?
KYLA SCANLON: I believe that increasing the number of homes is essential. Many proposed policies by the Biden administration focus on subsidizing demand, such as providing grants to first-time buyers, which may not be effective when there aren’t enough homes available to accommodate this financial support. It only intensifies the challenges we’re facing. The focus should be on the missing middle of the housing market—constructing more duplexes, triplexes, and townhomes—alongside rezoning efforts.
Approximately 70% to 90% of Los Angeles is designated solely for single-family dwellings, making it quite challenging to develop apartment buildings in that region. Creating denser mixed-use areas where people can live without exorbitant costs is critical. The approach should include diversifying housing types, rezoning, and ensuring that newly enacted policies prioritize enhancing supply rather than merely boosting demand.
Australia encounters comparable difficulties. The housing market in this country has experienced considerable price surges, especially in major cities like Sydney and Melbourne. The Reserve Bank of Australia’s monetary policy has influenced borrowing costs, with interest rates having a significant impact. Yet, the fundamental issue persists: a shortage of housing in desirable locations.
To enhance home affordability, we must concentrate on boosting housing supply. This entails promoting the development of various housing styles, including duplexes, triplexes, and townhouses, which can offer more affordable options for purchasers. Furthermore, rezoning initiatives are vital, as many Australian cities have strict zoning laws that hinder the construction of higher-density residential areas. Easing these regulations could pave the way for more development opportunities and an increased overall housing supply.
An additional crucial factor is ensuring that government strategies are directed towards supporting the supply side of the market. While providing grants and incentives for first-time homeowners can be beneficial, they may also inadvertently escalate prices if the housing stock remains insufficient. Policies should, therefore, prioritize simplifying the pathway for developers to construct new homes, including incentives for building and minimizing bureaucratic obstacles.
Moreover, tackling the issue of land availability is key. In several Australian cities, the scope of land for new housing projects is constrained. Governments across all tiers must collaborate to pinpoint and release appropriate land for development while ensuring it is well-linked to infrastructure and essential services.
We should also contemplate innovative approaches like modular and prefabricated housing, which can be erected more swiftly and economically than conventional building methods. Such strategies could help enhance housing supply and offer more affordable alternatives for buyers.
