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The Systemic Issues Driving Our Housing Crisis

America’s housing crisis stems from the simple fact that the nation has a housing shortage that could be as large as 15 to 20 million units. The Southern California fires are a stark reminder of how natural disasters can compound housing challenges, especially in regions where the market is already under immense pressure. It’s the latest poignant wake-up call for local governments to prioritize housing as a top agenda item, crafting solutions that not only expand supply but also emphasize resilience and affordability.

In 2008, just as the world economy melted down, real-estate brokers were sitting on an inventory of 2.2 million empty houses and condos. By 2023, that number had shrunk to less than 750,000. And according to Standard & Poor’s Case Shiller Index, which measures housing affordability based on repeat sales of single-family homes, the cost of home ownership is nearly the highest it’s ever been. 

But there’s more to this crisis than numbers suggest. There is also a systemic lack of integration in the ways we develop and distribute housing. This drives up prices and pushes families out of the market. At the same time, the way we build housing often reinforces economic and racial segregation, limiting opportunities for generational wealth building and community development.

Addressing these root issues requires not only building more homes but also designing and adopting policies that prioritize meaningful racial integration as a key principle. 

Housing is a mainspring issue: Let it snap and the whole works could grind to a halt. As housing prices soar — they’ve risen an average of 47 percent since 2019 — families are squeezed. At the unluckiest end of that curve, it means homelessness. Since 2015, the number of unhoused people living outside of shelters has risen by 48 percent, while since 2012 the number of rental units available for $1,000 or less has fallen by 24 percent.

Housing insecurity and its ripple effects (from poor employment, educational and health outcomes to neighborhood decline) strain a city’s resources and breed resentment among its citizens. It likely isn’t a coincidence that Donald Trump made his biggest gains in places with the highest housing costs.

“I think it’s a multi-faceted problem, particularly here in California, but in many places,” says Bill Fulton, a veteran urban planner, former mayor and author of eight books, including 2022’s Place And Prosperity: How Cities Help Us To Connect And Innovate. “I would observe a bunch of other things. One is, there aren’t enough people in the housing business, there aren’t. It’s not just there aren’t enough construction workers, there aren’t enough developers. There aren’t enough planners in the public sector. A lot of those people left the business in the Great Recession and never came back.”

But it’s not just a quantitative problem, says Fulton, who writes a Substack called The Future of Where. It’s a qualitative one. America’s existing housing stock, Fulton argues, doesn’t fit the needs of its population. Put simply, we’ve over-built McMansions and other large homes. In 1960, an American household was home, on average, to 3.33 people. By 2024, that number had shrunk to 2.51, the Census Bureau estimates. The U.S. now has 137 million spare bedrooms, Fulton points out.

His home state of California is over-regulated, Fulton says, “but there’s a problem in Texas too, and Texas is under-regulated, so maybe it’s not entirely about regulation.”

Change the script

The problems here are complex, and they multiply off one another. Governments frequently look for easy answers, for example by scapegoating short-term rentals or foreign buyers, but those arguments don’t ring true. The more difficult path is that cities need to reimagine their zoning laws and embrace the YIMBY approach. That’s harder than it looks. But there are also simpler answers to hand.

For one thing, local officials need to change the messaging around housing, says Diana Lind, a city planner and author of the popular The New Urban Order Substack. “I think the messaging around housing, the importance of housing choices and the importance of building more housing, are messages that have still not really reached as many people as necessary in order to build the kind and amount of housing that we need to address the current housing crisis.”

With deficit hawks back in charge in Washington, the federal government isn’t likely to be an effective partner here. That’s going to make things even harder, because many experts believe the lack of a cohesive national housing policy is a major driver of the crisis. White House leadership is needed, argues Charles Marohn, founder of the advocacy organization Strong Towns, “to leverage power and influence to push folks to make real and measurable commitments.”

Those commitments take a variety of forms. “Who here will agree to allow duplexes, triplexes and backyard cottages in every zoning classification?”, Marohn asks. “Who is lowering minimum lot sizes, reducing setbacks and eliminating parking requirements? Where are the partnerships with community colleges to train and support neighborhood incremental developers? Which of you local bankers are ready to be part of an approach that funds entry-level housing projects at scale?”

In short, cities have a lot of work to do on their own. And their states can help, says Rick Cole, a former city manager and mayor who’s just been reelected to the city council in Pasadena, California.

“Cities like mine have thrived on becoming job magnets without taking on the responsibility of housing their workforce, and the state has obviously taken a dim view of that, and is pushing cities to take responsibility for housing the folks that they’re employing,” he tells me. “That’s a fundamental shift that will take generations to effectuate, just as it took generations to segregate housing and jobs due to federal, state and local policy, so I think the action is at the state level, and I have advocated without a lot of success in California for the state to not only punish exclusionary communities but to reward inclusionary communities, to provide carrots as well as sticks.”

Think small (and integrate)

If cities are going to get serious about housing, they should start by thinking smaller, says John Petro, a housing policy analyst now with the consultancy Public Works, LLC who previously worked with the New York State Attorney General’s Office and the New York City Office of the Public Advocate.

“I think a real problem is the lack of starter homes for people,” he tells me. “You know, we have gotten to the point where average house sizes are so big now, the lot sizes are so big because there’s this instinct local governments [have]—they want to create ‘nice’ neighborhoods. And in their mind, that means bigger houses with bigger yards. And so they might put in minimum lot sizes that just encourage larger homes. And I think what we’re missing is a lot of those starter homes for families that need to get started and build some equity and then move up the chain if they feel like they need to.”

While they’re doing all that, city leaders are also going to have to take on people’s fear of gentrification head-on, says Pete Saunders, the community and economic development director of Richton Park, Illinois, who frequently works on projects with Funkhouser & Associates. He says too many city leaders think about urban planning as a matter of expanding what he calls “the citadels of affluence” — looking for ways to attract more rich people rather than for opportunities to integrate neighborhoods along several axes. “Gentrification” ought to mean “integration,” he says.

“It is every bit as expensive in those areas, but we have prices and rents that are rock-bottom in other parts of the city,” he tells me. “And I just find it strange that people are saying that the goal that they want is to expand that citadel of affluence so that there’s more units in places where they would prefer to live and not use this as an opportunity to expand integration into some other areas and expand opportunities for more generational wealth in other areas.”

Strategic planning — comprehensive needs assessments, stakeholder engagement, and crafting integration-focused policy frameworks — is an essential first step in tackling the housing crisis. Increasingly, both local and national governments, such as that of the Cayman Islands, with which we worked on a 10-year national housing policy and strategic implementation plan, are turning to that process to better understand their unique housing challenges and regional dynamics. The housing crisis is complex, but it’s solvable, and strategic planning lays the foundation for progress.

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