The opportunity to own a home continues to slip further away from people—young, working-class, and African-American communities, in particular—and one of the major reasons is that American cities aren’t building enough new housing.
That’s the conclusion reached by UC Berkeley’s Terner Center For Housing’s November paper by Research Director Elizabeth Kneebone.
Citing Zillow data, decennial census data, and “American Community Survey public use microdata for the nation’s 100 largest metro areas,” Kneebone concludes that, increasingly, homebuying is becoming a privilege within the purview of only a few wealthy classes of Americans.
The study also suggests that cities are, in part, to blame because they’re not building enough housing for a more diverse population. Some of the paper’s conclusions include:
- It’s not only the Bay Area suffering a housing crisis; per Kneebone, home prices are up more than 25 percent nationwide after inflation compared to 2000, with housing significantly less affordable in almost every major metro area. But Kneebone singles out San Francisco as among the “high-coast coastal regions” that have seen housing production diminish in recent years. In 2018, for example, housing production in SF was down 41 percent year over year.
- To the surprise of few, the Bay Area leads the nation in skyrocketing home prices. Between 2017 and 2018, average prices for the cheapest homes in the San Jose metro region rose 15 percent—the highest spike nationwide—and in San Francisco the same average price rose seven percent, the second highest in the nation.
- Kneebone also says that in all four major California markets—SF, San Jose, Los Angeles, and San Diego—the “bottom tier” homes were on average more expensive than “top-tier” homes in 72 other major metros nationwide.
- In 2000, the inflation-adjusted average annual income for a new homebuying household was $84,000, but by 2016 it was up to $90,686. The rate of new homebuyers who are black declined from 8.5 percent in 2000 to 6.6 percent 16 years later. And the number of homebuyers under 35 crashed from 36 percent to 31.6 percent. Of the demographics singled out, only one, Latino homebuyers, rose during that period, from 10.5 percent to 12.1 percent.
- The big kicker: “Evidence suggests that increasing production and diversifying the types of housing built could provide more ownership opportunities for lower-income and younger homebuyers.” For example, homeownership among those demographics is significantly higher for homes built since 2000 than it is for 20th century housing stock.
- The report also singles out “demand-side” problems like relatively low wages for the middle and working class—San Francisco, of course, has seen significant income appreciation in recent years, but not generally among the demographics Kneebone notes—difficulty obtaining loans, and the hurdles of saving up for a down payment. However, she also specifies that without more housing to access, solving those problems alone wouldn’t resolve the housing imbalance.
The conclusion: “These dynamics have shifted the makeup of recent homebuyers toward less diverse, older, higher-income households,” particularly in the most expensive markets and with the most expensive housing stock.
Once again, the research singles out San Francisco as one of the cities where the income disparity with new buyers since 2000 is acute.
Though Kneebone stresses the importance of “demand-side” solutions in unlocking housing access, the paper concludes that cities must also build more if they want to diversify access to homeownership.