A Decade of Home Building: The Long Recovery of the 2010s

Filed in Economics, Housing Affordability by on January 6, 2020 8 Comments

The 2010s was by far the lowest decade of single-family production in the last 60 years. During this 10-year period, single-family home construction totaled just 6.8 million units. By comparison, single-family starts ranged from 9.3 million units in the 1960s to 12.3 million in the 2000s.

(View NAHB Chief Economist Robert Dietz’s analysis that explains the economic causes behind the reduced number of single-family housing starts in the last decade.)

The lower amount of single-family home construction in the 2010s is even more striking when considering that the population of the United States has continued to increase over time.

Why were the 2010s different?

While reduced demand in the aftermath of the Great Recession had a large role in holding back home building — particularly in the first half of the decade — the primary causes that contributed to the relative construction weakness over the last 10 years were due to supply-side headwinds and declining housing affordability.

Specifically, builders have been dealing with a chronic lack of skilled workers (there were more than 300,000 open positions in the construction sector in October 2019); a shortage of buildable lots; onerous regulations; tariffs on lumber and other key building materials; and slow growth in acquisition, development and construction lending that has failed to keep pace with demand.

The lack of supply has driven up home prices and compounded affordability challenges. The problem is most acute in the entry-level market: Demand is strong, but the cost of construction has risen so significantly that it is not economically feasible for most builders to construct housing that an average-income household can afford.

What are the solutions?

To help builders boost housing production, local governments need to:

  • Roll back exclusionary zoning requirements that result in lower housing density;
  • Reduce costly impact fees associated with land development and housing construction;
  • Allow small lots, small homes and accessory dwelling units;
  • Rebuild the industry’s infrastructure — the labor force and the reliable sources of lending and building materials; and
  • Expedite approvals for affordable projects.

What’s the outlook for the 2020s?

There is little doubt that the next generation will experience more single-family construction than the 2010s, as Gen X reaches its peak earning years and millennials increasingly seek out single-family homes for purchase. Policymakers also recognize the magnitude of the affordability problem, as demonstrated by President Trump’s executive order on housing affordability and Democratic contenders talking housing in the presidential debates.

Proposals include expanding the Low-Income Housing Tax Credit to improve affordable rental housing access, improving land use and zoning decisions to increase housing supply, and offering workforce development resources to provide jobs and training. Comprehensive housing finance reform, including the future of Fannie Mae and Freddie Mac, will also occur during the 2020s, leading many experts to expect slow and steady progress in the decade ahead.

NAHB Chief Economist Robert Dietz provides further analysis in this Eye on Housing blog post.

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Comments (8)

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  1. Tom Atkins says:

    Thank you that is useful information.
    An interesting follow up article might be how the 2010’s low house start numbers coupled with the potential supply of houses left from the Boomer generation will effect house start projections for the 2020’s.

  2. In a growing area such as ours in the greater Myrtle Beach area, local governments are doing everything opposite of what you recommend. They are wanting to increase impact fees, require larger lots lowering density, and add more requirements that slow the process. Too many growing areas like ours are facing more problems providing even moderately priced new product, with no hope of producing a lower-priced product.

  3. Jerry Scripture in Harrisonburg, VA says
    Home site costs in our area are driven by excessive development costs and standards. Virginia, as a part of the Chesapeake Bay area agreement (intended to clean up the Bay, which everyone finds laudable) has signed onto a FOOLS AGREEMENT subjecting modest home-sites to abusive regulations. Improving a 3 acre site will cost us $100,000 to remove 4 pounds of Phosphorous/nitrogen run off. This site flows directly to pasture land, home to some 50 Holstein cows. EACH of those animals adds about 100 pounds of the same nutrients to the same watershed. Cost of abatement required of the farmer is near zero. I offered to send beef to my congressman, so DC could lay off the pork. He said he was HELPLESS So are builders and homeowners !!

  4. Laura Matson says:

    Skilled labor shortage was NOT the problem in our area. The story that the Recession was over in 2009 was straight rot. we live in an area of normally robust construction. And our excavation company alone, had to lay off all of our ten employees. Many of them moved to other parts of the United States. We, in the new homes industry, watched people in all the trades suffer greatly — plenty of skilled labor. The problem was The Recession! People across the board were losing their jobs or getting less hours, so of course, they can’t buy a house. Too many regulations are one thing that make houses cost more, but the The Recesssion that lasted throughout Obama’s presidency was the problem, as seen by real people, not in their ivory towers. We are in Clark County, Washington. Our housing costs are being driven by people fleeing exorbitant prices of homes in California, selling a modest house there and being able to buy a much nicer one here.

  5. Scott Sedam says:

    NAHB continues to be almost one dimensional in it’s thinking. Four of the five reasons cited here fall under the category of “Blame the Government.” That is inarguably a significant factor and yes, it’s good that NAHB is working on it. But it pales in comparison to the complete and embarrassing absence of real productivity growth in home building, especially compared to nearly every other industry on the planet. Productivity growth is the utilization of labor, material, and overhead to produce a product. Our track record is miserable. The evidence is clear from all the research that we are overpriced in every single market segment. So how do we fix that? Yes, there are answers if builders are willing to change the way they think and manage.

    • NAHB Now says:

      Scott,
      We encourage you to read the full analysis on our Eye on Housing blog, which addresses the economics. In particular:
      “And then there are operational solutions that could add housing supply. Perhaps modular and panelized construction will advance to reduce the cost of building. However, the share of single-family homes built with these methods declined from 2017 to 2018 to just 3%. In 1998, the share of this construction was higher than current rates, at 7% of single-family starts.”

  6. June Fletcher says:

    “A shortage of available lots” implies that builders are still contributing to sprawl by going for cheaper raw land, rather than doing assemblages and creating infill developments. Creative thinking on the part of builders and developers could solve the lot-shortage problem with no need for new infrastructure, and thus lower impact fees. Aging residential neighborhoods are the obvious targets for redevelopment, but with bricks-and-mortar retail going the way of the dinosaur why not turn underutilized strip shopping centers and malls into mixed use or purely residential communities? This would revitalize old neighborhoods, reduce commute times and preserve needed green space.

  7. bob shepherd says:

    Good article. What is missing is the impact of historically low interest rates with 0 down payments, as well as the mass exodus from the west

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