The housing market has reached crisis level. The median sale price of a home in the United States has is an astonishing $420,000. If this continues, and without a significant policy change it will, we will be freezing out tens of millions of Americans from ever owning homes. Just compare housing prices to median household income. Numbers for 2024 aren’t available, but rounding up generously from 2023 data would put median household income at $84,000. That’s a 5x difference between the price of a home and income. The long-held rule of thumb that you should not spend more than three times your household income on housing no longer applies. Not because financial thinking as evolved, but because following that rule would lock out large segments of the country from ever leaving the rental world behind.
Compare that to the past. In 1985, median household income was $23,620. Median house price? Only $85,000. A 3.6x difference. Before that, the ratio had largely stayed unchanged. The median person could afford the median home. Which is what you would expect. Under a free market, if the typical person can’t afford the typical home, then more homes would be built. Simple supply and demand. That’s the way the United States existed since time immemorial. Today, after decades of zoning rules and building restrictions so thick that just about any home built before 1970 would be illegal to construct today, supply is not allowed to keep up with demand. Building is now so expensive that the only way for builders to profit is to build expensive homes.
For my older readers, please, do the math on how much things have changed. How much was the first house you bought compared to your income? How much was your mortgage? Compare that to the situation of prospective homebuyers today. Consider a childless couple that makes $84,000 and wants to buy a home. They’ve worked hard, pinched their pennies, and saved up $60,000. The median house, including insurance and fees, would cost $3,220 a month. After accounting for taxes, retirement, etc., a couple that makes $84,000 a year might expect to earn $5,000 a month. $3,220 on housing alone is laughably out of reach. The situation today is untenable for the average person wanting to own a home. Seriously, think back to the first home you bought. What was your mortgage and what was your income? How much does that home cost now. Could you have afforded it? Most importantly, without that first home, could you have increased your wealth by renting? I thought so.
A criticism might be that the typical first-time homebuyer shouldn’t be looking to buy the median home. They should buy a “starter home” first and then move up. Two problems with that. First, starter homes aren’t being built, and haven’t been build since the middle of the 20th century. Second, I’m not assuming a typical first-time homebuyer. I’m assuming a relatively wealthy first-time homebuyer who makes the national median income. Historically, those couples were able to avoid starter homes and move right into average homes, as they had high incomes for their age. Today, a typical 25 year old married couple who make typical mid-20s income has been effectively priced out the housing market in many parts of the United States.
We must build housing. To that end, we must make a choice: allow people to build out or allow them to build up. We are not going to delve into the ground like dwarves, so those are the only two options. Currently building out or up is either impossible or prohibitively expensive. I’m not foolish enough to think we could change both, so we need to decide, out or up?
If we decide out, that means all the single-family homes and low-density areas of urban areas can stay as there are. Empty land, however, needs to be developed. No more worrying about the spotted barn owl. National Parks, flood plains, and land previously used for nuclear tests can stay pristine. The rest, however, needs to have houses built on it pronto. Yes, trees are going to be cut down. Yes, pastoral sunsets are going to be replaced with suburban sprawl. If those don’t like it, they have a simple option - buy the land and let it lay fallow. Otherwise, build.
If we decide up, that means the spotted barn owls can stay. Rural areas can stay rural and empty areas can stay empty. Instead, we build up. A very few areas with significant historical or cultural value can be preserved, but this must be capped at no more than 10 percent of all developed land. Everywhere else needs to allow increase in densities. Yes, single-family zoning will give way to townhomes. Yes, views of the mountains will be “ruined” by restricting the view of a few dozen single-family homeowners and granting it to hundreds of apartment dwellers. The United States can develop small-scale urban density. Towns that have fewer than 100,000 people will become more urban in character. Again, if people don’t want it, power to them. They can buy up land worth millions and leave it as a few single-family homes.
I mean that honestly. I have no problems with people or corporations deciding that lower density living is the way to go. Folk heroes have been made out of holdouts who have said no to millions of dollars to preserve their wide open spaces. That’s wonderful. Enjoy your views and breathing room. But own it. Choose to keep your space over instant wealth. Buy land and minimized it’s use. That’s fine. It’s the free market. What isn’t fine is instead using the law to enforce your preference. Using bureaucratic tricks and legal restrictions to not only preserve your space, but force everyone else to preserve theirs, is unacceptable. It makes it easier for the wealthy to stay wealthy and harder for the poor to become wealthy.
I understand that people love their undeveloped land and their low density. We should also love housing affordability and better lives for our fellow man. If we want to have plenty of nature and open space and affordable housing, build up. If we want lots of single-family houses and nostalgic subdivisions, build out. Without either, the situation will continue to deteriorate. tens of millions of disaffected individuals will rage, with some justification, that those who are allowed to follow the American dream aren’t the best or brightest, but the ones who bought a house before 2021. Housing affordability is not a pipe dream. It doesn’t require trillions of government outlays or a massive rejigging of society. It just requires winding back the regulatory clock about 50 years. This is imminently achievable.
So choose. Out or up.