There’s a lot of legislation going around about building more affordable homes. States like Utah, among many others are proposing budgets to build cheaper homes.
In recent years the price of homes have climbed so fast that it has priced out many Americans especially first time homer buyers.
Why building more affordable homes make it worse A problem the housing market has is that many people more are treating it as an investment. Every year more people are becoming land lords and holding onto their property. In recent years there has been a push for getting more people into real estate investment. Companies hold seminars teaching others about the “House Hack” strategy to be come wealthy. I have neighbors who have turned their homes and townhomes into rentals. This has decreased available home supply on the market.
If the above average Joe can afford to buy up properties and turn them into rentals, imagine when there are cheaper homes on the market. What will happen is investors will look at these “affordable” homes and buy them up and turn them into Rentals! They will probably put the 3-5% down and pass the cost of the mortgage + PMI + some to the renter.
When I say investor I don’t even mean ultra wealthy people and big conglomerates though they are included in the list. These investors could be our grandparents, or rich aunts and uncles. It could even be a savvy college student who wants to build wealth. I understand the investment strategy of this. It’s a smart strategy. It’s people thinking about retirement and passive income.
Put the house on the pedestal
Isn’t part of the America Dream to own a house? More specifically a Single Family Home? I don’t think a Condos and Townhomes qualify as someone living the American Dream. The American Dream is about owning a single family house. A place where we can have a yard for our kids and pets to run around. A backyard to have friends and family over for a bbq.
Now a day organizations are looking for ways to build cheaper homes such as Condos, Townhomes, and now 3D printed homes. This is just high density living, not the American Dream.
Let’s face it, a single family house will always cost more than a townhouse. A townhouse will always cost more than a Condo. The price could be summarized like this:
House > Townhouse > Condo.
When organizations build more high density living aka Condos and Townhouses we are making the supply of a house more desirable thus higher demand. Investors will snatch up all the “affordable” homes, driving demand higher and in turn raising the price. As the price of townhouses and condos go up so will the price of a house.
In summary, building affordable homes gives more people access to the ability to purchase the property and turn it into a rental which they will. Building affordable homes dilutes the supply of single family houses. They are the ideal home.