How big is the US housing shortage?
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This is the indicator for a planet money, a major mah.

And i'm willing wong, one of the hot topics of the U. S. Presidential campaign with housing affordability. Both candidates talked about what they were due to boost the supply of homes and bring Prices down.

The search for affordable housing is a major concern for a lot of people in the us. People like Olivia Garcia, she's from a los Angeles. And earlier this year, Olivia a and a fiancee opted to sell their stuff and travel overseas instead of paying L A. rents.

We did our traveling because we were like, all my god, it's so expensive just like living here being in a you know might as well go spend our savings doing this because it'll be cheaper anyway is we're making girl math word state that I am making money trading.

Do you have to take a course in girl math to do IT?

Some of us are born doing girl math. But you know, Olivia energy on a did eventually return to the us. So that Olivia Fiona could start a new job. And back in L. A, the apartment search was grim.

It's just all around really nightmarish, like the options are pretty slim.

A levy of is feeling what politicians have identified as a housing shortage. But how many homes would IT take to fix the problem? This gets us into another kind of mathematical conon.

M, A girl math.

Um no, how wa math this time. And I IT turns out trying to calculate the size of the problem is a bit of an economic brain teaser. So today in the show, we explained the tRicky business of quantifying the U. S. Housing shortage.

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In the early two dozens, the problem with the U. S. Housing market was that there were too many homes, this supply that eventually LED to a bust in home Prices, and that contributed to the great financial crisis. Now the consensus .

among politicians as well as people in the housing and construction industry is that we have the opposite problem, not enough homes, but calculating the shortfall has yielded really different figures. Daily vessel studies, fiscal and monetary policy at the brooking thinktank.

I keep hearing people on the campaign trail throwing out all these numbers about how many houses we were short, one point five million, three point eight and five point five million.

David looked into where these numbers come from, and he says a common approach to coming up with the housing shortage number is to use something called the vacancy rate.

You take all the housing units in the united states, apartments, single family houses, town houses, and you say, from government surveys, what percentage of them are vacant.

Now that might sound pretty straight forward, but David says it's not a clear cut. What counts as a vacant home? Like think a bit of vacation home.

Some of the estimates count, you know the the cottage on the lake that you only use six months a year. If they do their survey in february and its empty, they cannot is vacant.

but other estimates leave that lake cottage out of the equation. Another example of an ambiguous case is a house that's vacant but unavailable.

Let's say your mother died and you're still cleaning at the house, so there's nobody living there, but it's not available for sale or rent.

So just this first step in quantifying the housing shortage. Calculating the current vacancy rate can be tRicky. The next step is comparing the current vacancy rate to a historical vacancy rate that's considered Normal. If the current rate is lower than the so called Normal rate, that is considered an indicator of a housing shortage.

But as David explains, determining the Normal rate opens up another kind of analytical worms.

What is a Normal or healthy vacancy rate isn't fixed in time. So think think about this. We have a lot Better, uh, listing services and real estate, and you can do a lot of shopping online.

So maybe house stay vacant less often because it's easier, thanks to the technology for a buyer and seller to find themselves. So you might over time to see a falling vacancy rate. And these estimates kind of ignore that possibility.

Big players in the housing industry use the vacancy approach as the basis for calculating the size of the housing shortage, but David has a variations in how they crunch the vaccine numbers sometimes results in different figures.

And then the economists that take a completely different approach to quantifying the housing shortage for indents back in twenty twenty two researchers now with the american enterprise institute and George min university, they estimated how many housing units they think would have been built in the us. If zoning regulations and other restrictions did not exist.

basically they say that um if we had had so many restrictive zoning rules, we would have had twenty million more houses in twenty twenty one than we actually had. That's a huge number, right? It's fourteen percent of the national housing stack.

So we get all these different estimates for the housing shortage, which IT could make you think like, okay, well, what's IT all for? And David himself actually questions the usefulness of a national number for the housing shortage, because all he points out that housing largely is a local issue. So a national figure glosses over the differences in housing markets from state to state, city to city, sometimes even down to the neighbor od level.

If anything, in the world is not national, its housing, the policies we need are probably very much at the state local zoning level. And so in some respects, the national thing is almost meaningless.

In california, where Olivia Garcia lives, governor gave newsom has described housing affordability as the state's original Olivia afion. I did find a place to live in los Angeles through a website for furnished rentals.

It's only four hundred square feet because it's a converted garage attached to a single family home, although he does have its own entrance. The cost two thousand dollars a month, which is actually less than the rent they paid on their previous place.

Let's the smallest of all the ones we looked at, we were like, okay, well, this is this is going to be like tight living. But you know, we're we going to work for sure.

This converted garage is a kind of housing called an accessories dwelling unit. There are also called coach houses or granny flats or casitas. And they've emerged as one way to address the gap in affordable housing. California pass legislation back in twenty sixteen that required cities and counties to allow these units on most residential lots.

Olivia father, who also lives in the la area, actually runs out his own accessories dwelling. You IT to a family of five. Olivia says her father's tenants are in tight quarters but making the best of IT. Just like SHE and herpes, they are adapting to their small space.

We have like our own little patio area. There's like a barbecue and ton of seeing, but like IT really just expands the space like you don't feel like you're cooped up in a small four hundred square foot little unit. So I think that's been the best part.

We may see more of these accessories dwelling units popping up as state and local governments change laws to allow them. David wessel brooking says that home Prices and rents, not the vacancy rate, should signal whether these kinds of housing policies are effective.

And speaking of housing policies, tomorrow's episode, we will talk about what the present elect, Donald trump, says he wants to do about making homes more affordable.

This episode was produced by cry bridges with engineering by Jimmy Kelly. IT was specchi ked by sara test caking canon is our shows editor, and the indicator is a production of N P, R.

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