By Gary Bennett and Hugh Gordon
This article appears in the October 21, 2023, issue of the Frederick News-Post.
As members of the Affordable Housing Council in Frederick County, we spend lots of time looking at houses on Zillow, Redfin, Realtor.com and The Frederick News-Post.
This is no news to anyone, but we can assure you that houses are more expensive than ever. Here in the Baltimore/Washington, D.C., region, it’s shocking.
In Maryland, according to Zillow, more than half of all buyers in June 2023 paid above list price for their home. Buyers are paying, on average, 1 to 2 percent above asking price now.
That may not sound like a lot, but on a $500,000 home, that may be another $10,000. One Realtor friend told us that for one of her listings, there were 32 offers, all above asking price. That means 31 unhappy, unsuccessful home seekers.
Renters have it no better.
In Maryland, the National Low Income Housing Coalition has found that a renter working 40 hours per week and earning Maryland’s minimum wage of $13.25 per hour must work 79 hours each week to afford a modest one-bedroom apartment and not be cost burdened (not spending more than 33% of income on housing costs).
But it’s not just Maryland and the D.C. area. The lack of affordable housing is a nationwide problem. Over the last couple of years, we’ve seen housing prices reach a level they’ve never reached before.
According to the National Association of Realtors, the median price for a house in America is now $414,000. That is the second highest median price recorded, after June 2022.
In Maryland, it’s worse. Maryland Realtors, a nonprofit membership organization, reports the average sales price in Maryland is up more than 3 percent from last year to over $486,000. Our proximity to Washington, D.C., has a lot to do with this.
That price may not sound like a lot for this region, but keep in mind it includes all areas of Maryland, rural and urban. Those prices make rents more expensive and home ownership unobtainable for millions of Americans.
How did this happen, and how can we fix it?
We can think of today’s exorbitant housing prices as a result of a supply and demand problem. The housing supply isn’t matching demand.
On the demand side, there has been a generational shift in who is buying homes. Millennials are now the largest generation in American history, and they are aging into their prime home-buying years.
On top of that, until recently, 30-year fixed-rate mortgages were at an all-time low, which meant it was relatively cheap to borrow the money to buy a house. That enticed people to buy if they could, making demand for houses even greater.
Over the last two years, interest rates rose past 7 percent, but because of low inventory, that has yet to substantially cool demand in the housing market.
From 2010 to 2019, there were fewer homes built in the U.S. than in any decade since the 1940s. In particular, the construction of smaller, entry-level homes, for first-time home buyers, has dropped more dramatically.
In the 1980s, those “starter” homes made up about 40 percent of homes built. Today, it is closer to 8 percent.
Currently, the National Association of Realtors says the U.S. is down anywhere from 5.5 million to 6.8 million starter homes needed to satisfy demand.
Moreover, according to Pew Research in 2021, 55 percent of adults under age 30 said the lack of affordable housing is a major problem, up from 39 percent in 2018.
This housing shortage drives a big part of the problem for renters and prospective homeowners. It is worse where demand is highest, such as near good jobs, transit and schools like Frederick.
One straightforward solution is to simply build more affordable homes in desirable places. For years, however, there has been one big obstacle — builders aren’t allowed to.
Zoning or local regulations that decide where things can be built overwhelmingly favor single-family homes over multifamily homes. Zoning boards have banned the ability for anyone to build anything other than a single unit of housing on that land.
In many towns, zoning boards exclude all types of multifamily housing from their neighborhoods.
And not just large apartment buildings. Things like duplexes and fourplexes are illegal on most residential land in many American cities.
Single-family housing is the law in 70 percent of Minneapolis, 75 percent of Los Angeles, and 84 percent of Charlotte, N.C., to name a few. This is a huge determining factor for the housing shortage in the U.S.
We need states to step in and preempt municipalities from enacting and enforcing land-use restrictions that raise housing costs. Land-use control is constitutionally guaranteed to states, not municipalities.
States often delegate the authority to municipalities. But they can and should take it back when cities don’t use it for public benefit.
Gary Bennett and Hugh Gordon are longtime Frederick County residents and members of Frederick’s Affordable Housing Council.