House Selling

Affordable Housing’s Two Biggest Barriers Are Not Easy to Overcome

Go to any major city and ask local leaders what the top five most pressing issues are, and nearly everyone will cite affordable housing somewhere on the list. Affordable housing may not be the number one problem in every city, but it is an ongoing problem almost everywhere. Unfortunately, it is also a problem with few solutions.

It is easy to say that builders need to be encouraged to build more affordable housing. It is easy to point to things like rent control and zoning ordinances as government tools for keeping housing prices in check. Yet few problems are easily solved with one or two targeted actions. Solving real-world problems requires understanding what is at the root of those problems and then doing something to address said causes.

Affordable housing faces two main barriers that are hard to overcome. The first is bureaucracy while the second is economics. Until both are addressed effectively and permanently, affordable housing will continue to be problematic.

The Bureaucracy Problem

Around the country, bureaucracy is the biggest impediment to progress. Everyone on the bureaucratic chain of command has to have input. Unfortunately, where there is bureaucracy there is also politics. Builders have to make nice-nice with the bureaucrats and politicians in order to win their favor. But if one bureaucrat is unhappy with another, they have to work things out themselves. This slows down the process, adds to building costs, and delays projects.

The bureaucrats and politicians in Santa Rosa, California appear to have figured this out. Where cities like San Francisco continue to put the brakes on affordable housing development – despite complaining that there aren’t enough housing options for low income families – Santa Rosa leaders are aggressively working to eliminate as many barriers as possible.

Their efforts have started to pay off to some degree. More builders seem interested in applying for permits to build affordable housing in the downtown area. But eliminating the bureaucracy alone hasn’t been the golden goose Santa Rosa had hoped. Why? Because economics are still a factor.

The Economic Problem

Builders are more than happy to build any buildings that will make them money. But more often than not, the financial benefits of building affordable housing just aren’t there. Developers looking to build rental units cannot justify the cost of building in areas with limited rent potential. Those building single-family homes are reticent to do so if the relationship between building costs and sale prices means a lower margin.

CityHomeCollective, a Salt Lake City real estate company, says that they’ve seen this economic problem in Utah homes for sale too. It is consistent across every category of residential construction in every area of the country. If builders cannot justify the economic costs of construction, they simply will not build.

Salt Lake City is in the midst of a housing boom right now. Thanks to companies bringing all sorts of high-paying jobs to the Wasatch Front, builders have a steady stream of customers looking for luxury homes, condos, lofts, etc. They will build as long as the customers are there. However, they will stop the minute the market dries up.

There is a need for affordable housing in Salt Lake City and Santa Rosa alike. The need exists all over. But if bureaucracy and economics make it too difficult to build single-family homes and rental units and still make a decent profit, much-needed housing is not going to be built. So how do cities overcome their bureaucratic and economic problems? If we knew the answer to that, affordable housing would not be an issue.