According to The Urban Land Institute (ULI), homebuilders once catered to the middle-class, but new evidence points to a lack of nonsubsidized, attainable homes for America’s largest demographic. The ULI Terwilliger Center for Housing recently released a report titled “Attainable Housing: Challenges, Perceptions and Solutions,” which includes an assessment of the housing market, barriers homebuilders are facing as a result of the market, an outlook from ULI members and case studies related to the subject. While the report suggests many factors have led to a lack of affordable, middle-class homes for sale, it says industry leaders in the planning, building, real estate and investment industries have taken note of the deficit and are responding in innovative ways.

“Since at least the mid-1980s, household incomes have increased at a slower rate than home prices. However, the divergence between household incomes and home prices widened dramatically during the housing market boom in the mid-2000s,” the report states. As the market shifts, so do consumers’ demands, which the ULI reports are due to a decline in traditional family households. Although the sizes of families have decreased, the ULI’s report notes homebuyers desire larger houses with more bedrooms than before, adding to the market disparity.

ULI members cited cost of capital, lack of building efficiencies, availability of buyer financing and cost of materials as the top four challenges they have toward delivering attainable housing—defined as nonsubsidized, for-sale housing that is affordable to households with incomes between 80- and 120% of the area median income. A misunderstanding of attainable housing, a lack of industry leadership and government regulations and fees were other challenges noted by ULI members surveyed.

Survey results show ULI members believe limiting community amenities, providing lower-quality finishes and locating homes in less desirable areas are the most acceptable consumer solutions for attainable housing.

In an effort to increase attainable housing, the report offers four strategies some developers, builders and architects are already embracing to evolve the market:

  1. Small homes- These houses are characterized as homes with less than 1,400 square feet, one to three bedrooms and one to two bathrooms. Small homes are meant to allow for high-quality finishes within master planned communities near many amenities;
  2. Value housing- Developed by homebuilders as a “simplified” version of their core brand, value housing offers homebuyers streamlined structural and interior finish options but in a variety of unit sizes and types. Value housing enables the homebuilder to deliver product more efficiently and ultimately more cost-effectively because they are making fewer repeated iterations;
  3. Missing-middle housing- These homes are compatible in size to a single-family home (700 to 1,900 square feet) and have between one and three bedrooms, one or two bathrooms and are between one and three stories. Missing-middle housing is defined “as housing typologies at densities between those of single-family homes and mid-rise communities.” A common architectural feature of missing-middle housing is lots of windows to increase natural light and reduces perceived density; and
  4. High-density detached housing– Also known as cluster housing, these homes embrace a traditional feel but at a higher density than most single-family homes (usually eight to 15 units per acre). Units are typically between 700 and 1,500 square feet and have one to three bedrooms, one to two bathrooms and are two stories.

“Ultimately, this type of housing—attainable housing—will relieve the current downward pressure on the market that has kept renters from becoming homeowners and that has made housing increasingly unaffordable for Americans at lower income levels,” ULI officials suggest.

 

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