At a time when macroeconomic, medical, and political forces are aggravating the challenges of affordable housing in the US, a set of solutions, including modular construction, micro-housing, digitally enabled home-sharing, and new financial tools for renters, are helping reduce housing costs and expand housing access.
According to Harvard’s Joint Centre for Housing Studies, approximately one-third of US households are cost-burdened by housing, and more than a quarter of US renters spend more than half their income on housing. Current trend lines suggest the problem is getting worse.
Depending on your perspective, you can ascribe the challenges in the housing market to general economic conditions, to local regulations, or to federal policy. The market for new housing is shaped in large part by the costs of construction, especially wages. During a booming economy, construction wages increase sharply.
Local regulations can severely aggravate (or ameliorate) the challenge. For example, San Francisco has some of the most restrictive zoning policies in the country, which has led to a crisis of affordability. To afford to buy the median home in San Francisco, a family has to be making $198,000 per year.
Lessons from history
Across time and geographies, technology has served as a counter-weight, consistently driving down housing costs, improving quality and expanding access.
Today, new solutions promise similar benefits for homeowners and renters, especially modular construction, micro-housing, and home-sharing platforms. New financial tools are also helping more individuals access quality rental homes and build financial stability.
As has been recently reported, in high-end markets, building a unit of low-income housing can cost as much as $750,000.00. One alternative is modular housing, where standardized panels, rooms or apartments are built offsite. Modular housing can reduce the costs of quality control and inspection, avoid weather-related slowdowns and provide certainty for developers concerned about the timing of project completion. And more and more people are realizing the benefits and freedom that come having a lightweight lifestyle. This often comes with smaller or even micro housing solutions.
Relevance of the sharing economy
New construction is one part of the puzzle but there is a vast untapped resource: spare rooms in existing homes. Homeowners have been letting rooms for rent since there were homes but historically the transaction costs to rent out a room were high: advertising, screening and collecting rent.
The rise of the sharing economy has reduced those costs and helping homeowners split up their homes into multiple units or rent out spare bedrooms – of which there are at least 50 million in the US. In the process, they are creating new low-cost rental inventory, often of higher quality and in better locations than the alternatives.
Modular construction, right-sized or micro housing, home-sharing platforms, and rental tools are only three examples of the technologies that are helping to lower costs, improve quality and expand access to housing in the US.
Even as labor markets continue to tighten and federal support for low-income housing grows scarcer, cities and towns around the US can encourage these solutions and others like them to start making housing more affordable today.