The death of the starter home

Reporting by the New York Times suggests the US housing market faces a severe shortage of affordable single-family homes. Zoning regulations, land costs, and speculative housing investment are core variables affecting the price and diversity of housing stock.

Why should we care?
Starter homes traditionally offered a chance to build equity—but that opportunity is increasingly under threat. In part, this is a political issue that could benefit from industry lobbying, especially when it comes to minimum lot sizes and the materials that are permitted in construction. “Communities nationwide are far more prescriptive today than decades ago about what housing should look like and how big it must be…” the Times explains. “Nearly all make it difficult to build the kind of home that could sell for $200,000 today.” One construction owner said he had effectively been “regulated out” of building “anything remotely on the affordable side.” In a less overregulated market, builders have almost as many incentives to build affordable housing as more expensive ones, because the profit margins on starter and luxury homes are largely the same—especially since pricier homes require more customization and see their prices sway more severely in bear markets. Apart from innovating to bring construction costs down, proptechs may consider engaging directly with constituents to intentionally design and zone for the housing stock that would most benefit a community.