Issue link: https://digital.nexsitepublishing.com/i/1523082
BY ROBERT DIETZ, PH.D. CHIEF ECONOMIST NATIONAL ASSOCIATION OF HOME BUILDERS @DIETZ_ECON Dr. Robert Dietz is the Chief Economist for the National Association of Home Builders, where his responsibilities include economic forecasting, industry surveys, and policy research. Prior to joining NAHB in 2005, Robert worked as an economist for the Congressional Joint Committee on Taxation. He is a native of Dayton, Ohio and earned a Ph.D. in Economics from The Ohio State University in 2003. I t is almost universally accepted that the U.S. faces a housing deficit. However, the size of that deficit is a matter of debate. The NAHB Economics team has estimated that the U.S. faces a shortfall of about one and a half million homes nationwide. The National Association of Realtors has estimated that the deficit is larger and could sum to at least five million homes. The fact that the shortfall is measured in the millions is striking. Of course, increasing the number of homes built is the only workable solution to solving the housing affordability crisis, and additional housing supply would tame inflation pressures above the Federal Reserve's long-term target rate of 2%. While zoning for and building more traditional single-family homes is a clear way to add additional housing supply, increasing medium-density home building is another possible strategy. This is particularly true for higher-cost, Townhouse Construction Growth a Bullish Signal for Housing larger markets where the cost of land and regulatory burdens are high. Townhouse construction is a useful way to add light-touch density. For example, townhouses are a good option to incorporate into urban village projects or redevelopment efforts, such as converting vacant or failing malls or other retail into medium-density residential neighborhoods. And townhouses are in demand. Despite weakness for single- family construction at the end of 2023, townhouse construction recorded the best quarter for starts in more than 17 years. According to NAHB analysis of the most recent Census data of Starts and Completions by Purpose and Design, during the fourth quarter of 2023, single- family attached starts totaled 47,000, 27% higher than the fourth quarter of 2022. This represents an acceleration over the last four quarters, during which townhouse construction started totaling 158,000 homes, almost 7% higher than the prior four-quarter period (148,000). Townhouses made up almost 20% of total housing starts in the final quarter of 2023. With these recent gains, the four-quarter moving average market share (almost 17%) is the highest on record for data going back to 1985. I expect to see ongoing expansion of townhouse construction, but only for those markets with efficient zoning policies. From a geographic perspective, communities that minimize regulatory and bureaucratic costs associated with land development and home construction will add relatively more housing. And these are the areas that businesses will seek out as housing affordability conditions remain challenging nationwide. MEMBERSHIP VALUE 35 SUMMER 2024 | master BUILDER