People have long complained about the cost of housing, but the problem is getting only worse as the gap between prices and wages widens. There’s a long list of contributors to the affordability crunch, but one in particular stands out — the home-building industry itself. Even with prices rising and demand high, the sector has been held back by its own hidebound business models. One important number tells the story. Productivity in construction has been flat for at least a generation. Homebuilders to a large degree are erecting houses the way they did half a century ago, an approach that now is buckling under the weight of inflation, material shortages and a lack of skilled labor. The result: The U.S. economy is struggling to deliver a basic human need — shelter. Why do we care about productivity? Put simply, productivity is a measure of output per worker. It’s always been important, but productivity matters more than ever in the current economy, with its dearth of skilled labor and rising rents. When productivity increases, wages typically increase, too. When workers are paid more and produce more, construction costs fall. That means lower rents and cheaper houses. In the big picture, productivity gains are the economic version of a free lunch, said Robert Dietz, chief economist at the National Association of Home Builders. “Construction is one of those sectors still using methods proven successful over time but that haven’t changed a lot,” Dietz said. Because the industry is highly decentralized and dominated by small players, no one company has market power to push systemic change or the deep pockets to invest in new technology. Modular construction, in which parts of a house are built off-site, is one way to boost productivity and once seemed promising. In the late 1990s, off-site construction was incorporated into 7 percent to 8 percent of new single-family homes. But as building has shifted from urbanized parts of the U.S. to the more rural South, that figure has fallen to about 3 percent, Dietz said. So what? Housing is so fundamental to the economy and society that market failures in the space have outsize consequences for everyone. The most obvious is affordability. The median price-to-income ratio, a widely used measure of affordability, hit an all-time high in 2021, according to the Harvard Joint Center for Housing Studies, with the median price of an existing home reaching 5.3 times the median household income. The last record, 4.9, was notched in 2005. And in March, home-price appreciation nationwide hit 20.6 percent, topping the previous year-over-year high of 20 percent in August 2021. It was the biggest jump in three decades of record-keeping, according to Harvard.
| 
No comments:
Post a Comment