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What Housing Crisis?

Opinion article posted in Inman's The Wrap

By Jotham Sederstrom, January 25, 2020

From 2012 to 2019, builders constructed 5.9 million homes, far fewer than what's needed for the 9.8 million households created during the same period.

That's right: The United States is short 3.9 million homes needed to meet buyer demand, wrote Inman's Marian McPherson, citing a report released Tuesday. And to hear it from real estate leaders, that dearth is rapidly approaching crisis-level, with affordable housing one of the most obvious casualties.

On Wednesday, California Association of Realtors President Jeanne Radsick sounded the alarm, insisting in an op-ed for Whittier Daily News that, should local lawmakers fail to approve a bill to reform zoning laws in California, the state's already formidable homeless problem will only get worse over time. She later expanded on the crisis in an op-ed for Inman on Thursday.

"Will we have the courage to stand up to local governments that vigorously block housing development?" Radsick asked. "Will we do the right thing in the face of overwhelming evidence that the housing shortage and affordability crisis is contributing to homelessness and driving college graduates and working families to leave California?"

But local governments aren't the only obstacle in the fight to reverse a national housing shortage. According to McPherson in an article published Tuesday, real estate private equity funds raised a paltry $18 billion in the fourth quarter of 2019, a $17 billion decline from the previous year and the smallest amount raised since 2013. Why? Because of what investors see as a softening in property value growth.

"The market is not providing as many clear opportunities to hit those high return objectives like it once did," PJT Park Hill Real Estate Group Co-Head Michael Stark told The Wall Street Journal.

In other words, don't expect a surge in housing starts, and affordable housing in particular, with venture capitalists who are increasingly willing only to shell out cash in high-yield luxury markets, such as those enjoyed by the likes of Meryl Streep and the actor Jason Statham, both of whom unloaded posh homes in excess of $10 million earlier this week in Manhattan and Malibu, respectively.

From such lofty heights, it's hard to see an affordability crisis, let alone an inventory shortage.

Nonetheless, it wasn't all bad news this week. As Inman's Patrick Kearns reported, an unlikely solution to the housing shortage has originated, not from the real estate industry, but also the scientific community. Indeed, a group of researchers from the University of Colorado have engineered a "living building material" made out of recyclable bacteria. In other words, cheaply made bricks that can reproduce themselves.

If only the private equity funds and asset managers of the world would take notice.

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