FFS, Stop Saying There’s a Housing Shortage in America
A residential tower in Los Angeles has been in the news in recent days. The unfinished building is covered with graffiti, an artistic flourish that accentuates the fact this abandoned, $1 billion project has never seen a resident. Big, empty, expensive buildings have become fixtures in most major American cities in the last decade. It’s tough to get an accurate census on just how much vacant housing there is, but consider the following available figures:
- An estimated 5.5 million housing units sit vacant in the nation’s 50 largest metro areas (source).
- New York City had at least 102,900 market rate vacant units (source) and another 40,000–90,000 empty rent stabilized ones (source) as of 2021.
- San Francisco had at least 60,000 vacant units (15 percent of all homes) as of 2021 (source).
- 2,300 of Boston’s 41,500 state subsidized units were vacant last year (source).
- A recent report found that Denver had 22,673 vacant units (source).
It bears repeating the number of empty housing units is almost certainly much higher than the above figures, but because building owners often ‘warehouse’ units — taking units off market to reduce supply and drive up prices on available ones — actual numbers are tough to come by. But even lowball figures suggest a bounty of empty, available housing across the country. If this is the case, why do headlines keep decrying housing shortages and a housing crisis? Let me give you the shitty reasons why.
The first reason is that the available housing, though vacant, is priced above what can be afforded by people making the area median income (AMI). To illustrate this reasoning, let’s say there are 100,000 empty apartments renting for $5,000 in a metropolitan statistical area (MSA). This MSA also has 100,000 people in need of affordable housing making an AMI of $100,000. Housing is considered affordable if it costs less than 30 percent of take home income, which in this case would be $2,500 a month or less (30 percent of $100,000 divided by 12). Because the vacant units are priced twice as high as what AMI can afford, they are considered unaffordable, and irrelevant to the 100,000 people in need of affordable housing. Government leaders, in concert with newspapers, policy think tanks, and real estate developer PR firms, will repeat that are no available affordable units, thereby making a housing crisis. Seldom, if ever, do those same parties talk about repricing or reconfiguring the expensive, empty units to reflect actual market demand and value, thereby making them affordable for those making AMI. Seldom does anyone suggest building different unit types that are a match for a MSA’s economic and demographic realities, which has been my rallying cry for years.
The second shitty reason is related to the first. Developers make a ton of money building new buildings. A developer might take home fees that are 3 to 15 percent of total development costs, which for large buildings and multi-unit developments can be tens to hundreds of millions of dollars. This money is made before the buildings are occupied. If the building doesn’t fill up when it’s built or near-built — like the building in LA — the developer can jump ship and default on the building’s debt, all while retaining the initial development fees. Because a project’s debts are usually tied to independent legal entities, the developer is shielded from liability when that project fails. This same developer will then advocate for construction of more housing, affordable or market rate, ostensibly to solve the housing crisis they created and profited from. What they’re really advocating is generating more development fees.
In truth, housing shortages and housing crises are red herrings for a greedy, heartless real estate industry. So what can be done?
- Tax the shit out of empty units. If these taxes significantly offset development fee gains, developers would make and price their units to move, not to profit off their construction and let sit fallow.
- Mandate pricing corrections when units don’t sell or lease up in a certain amount of time, e.g. 90 days.
- Stop permitting buildings and housing units that are mismatches for people making AMI. NYC’s ‘Billionaire’s Row’ was developed specifically for the world’s richest people, not around people living and working in the city. Now, many billionaire row units sit vacant while average workers in NYC have scarce affordable housing options. This kind of shit happens by design and it needs to stop.
- Stop saying there are housing shortages and a housing crisis and start calling it for what it is: a moral crisis stemming from the commoditization of basic human needs, including, but not limited to housing.
Correction: a previous version of this article mistakenly identified Crypto.com Stadium as the home of this year’s Super Bowl.
