Natural disasters like the LA fires will deepen the U.S. housing crisis

By Housing News

Researchers
at
the
University
of
Southern
California
(USC)
released
an
in-depth
study
this
week
in
which
they
argue
that
“decades
of
policy
missteps“
have
created
a
shortage
of

affordable
housing

across
the
U.S.
and
are
pushing
homeownership
out
of
reach
for
millions
of
Americans.

The

full
study
,
which
was
published
in
the
January
edition
of
The
Russell
Sage
Foundation
Journal
of
the
Social
Sciences,
goes
back
20
years
to
examine
the
origins
of
the
current
housing
crisis.
The
analysis
also
comes
at
a
time
when

multiple
wildfires

are
devastating
portions
of
the

Los
Angeles

area.
CBS
News

reported

Wednesday
that
at
least
25
people
have
been
killed,
with
more
than
12,000
structures
lost
and
88,000
residents
still
under
evacuation
orders.

USC
researchers
said
that
the
national
housing
shortage

which
ranges
up
to

7
million
units
,
according
to
some
estimates

is
only
expected
to
deepen
in
the
coming
years
due
to
the
effects
of
climate
change
and
the
frequency
and
intensity
of

natural
disasters

such
as
hurricanes
and
wildfires.

“A
tightly
constrained
housing
supply
reduces
resilience
to
absorb
losses
from
unexpected
disasters

fires,
earthquakes,
hurricanes
and
more.
In
Los
Angeles,
this
lack
of
flexibility
could
rapidly
intensify

gentrification

as
relocations
strain
the
existing
housing
stock,”
according
to
Dowell
Myers,
a
USC
professors
and
the
lead
author
of
the
study.

The
study
claims
that
the
crisis
can
be
traced
back
to
the
early
2000s
when
subprime
lending
activities
were
prevalent.
The
resulting

housing
market
crash

and
the
Great
Recession
led
policymakers
to
overcorrect
by
“tightening
mortgage
lending
standards
and
limiting
funds
for
new
construction.“
In
turn,

millennials
,
who
were
just
starting
to
enter
the
housing
market,
were
faced
with
fewer
choices
as

homebuilding
activity

fell
to
its
lowest
level
in
60
years.

Data
from
the

Urban
Institute

shows
that

mortgage
credit
availability

as
of
second-quarter
2024
remains
far
below
what
is
judged
to
be
“reasonable
lending
standards“
from
2001
to
2003.

The
policy
missteps
that
are
mentioned
in
the
study
include
“severe
underestimations
of
millennial
demand“
that
didn’t
become
evident
until
many
years
later
“when
pent-up
demand
surged.“
Policymakers
also
failed
to
account
for
how
past
policies
and
population
trends
impact
current

homeownership

rates;
utilized
“flawed
demand
measurements“
that
did
not
identify
households
that
cannot
form
due
to
housing
shortages;
and
misinterpreted
the
post-housing
crash
decline
in
homeownership
to
a
“permanent
shift“
in
consumer
preferences.

The
study
notes
that
from
1976
to
1990,
the
national
birthrate
increased
by
32%,
which
eventually
led
to
an
influx
of
young
adults
moving
into
cities
by
2010.
The
Great
Recession
“delayed
their
entry
into
stable
jobs
and
housing,“
and
by
the
time
they
emerged
from
the
recession
to
buy
homes,
“supply
was
scarce.“

Homebuilders

and
local
officials
mistakenly
assume
that
millennials
would
stay
in
apartments
and
have
roommates
for
longer,
but
instead
their
demand
to
own
a
home
skyrocketed.

USC
researchers
offered
two
key
solutions
to
address
the
growing
inventory
shortage.
The
first
is
to
shorten
the
lag
time
for
creating
new
homes
by
anticipating
demand
over
the
next
five
years.
The
second
is
to
combine
the
tracking
of
population
growth
and
housing
supply
rather
than
isolating
them.

“Housing
policy
needs
to
be
better
at
planning
for
the
needs
of
different
age
groups
and
their
life
stages
to
avoid
mismatches
between
supply
and
demand,”
Myers
said.
“Without
proactive
policy,
we
risk
not
only
falling
short
of
meeting
demand
but
also
being
unprepared
with
a
resilient
housing
supply
that
can
accommodate
victims
of
climate-driven
disasters,
like
wildfires,
or
other
emergencies
that
create
new
demand
in
an
instant.”

 

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