What to Expect When Cities Don’t Build New Homes

Often, it’s good news when a city experiences growth, but it can be a catch-22 in major metros with strict rules on land use: Healthy local commerce attracts workers to the area, but land use restrictions hobble the ability to house the newcomers. Research from Zillow indicates a correlation between a city’s local inventory, land use regulations and ability to meet the housing demand — typically, the more regulated the city, the bigger the drop in available inventory.

Here are three things you can expect when your city doesn’t build new homes.

Inventory will remain low

It’s more difficult to build new homes in metros where land use regulation is the most restrictive, so expect to see a decrease in the number of homes for sale. This will be especially true in areas where employment is on the rise: Strict regulation plus rapid job growth equals a bigger drop in available inventory compared to metros with fewer land-use regulations and flat or sluggish employment numbers.

For example, in highly regulated, fast-growing Seattle, the share of homes for sale dropped by 1.3 percent over the past five years. But during the same time period in less regulated, slow-growing Syracuse, the supply of homes on the market fell by just 0.1 percent. It might be a challenge to find housing for your relocation clients as well.

More households will double up

Not surprisingly, more adult households are doubling up to live within city limits — whether taking on housemates by choice or forced into it due to the sheer lack of housing options — especially in cities where land use is most restrictive.

Between 2011 and 2014, the number of adults per household grew twice as much in more restricted metros than in less regulated ones. Expect to see more clients considering bigger homes to accommodate non-nuclear family units.

Boomers will be looking, too

These crowded households might resemble “Golden Girls” as much as “Big Bang Theory”; millennials aren’t the only ones moving in together — established professionals and retirees are doubling up as well. Looking to save money or enjoy a richer social life, these residents might ask you to help them find homes that are closer to active downtown areas and have plenty of room for older adults.

While land use regulations aren’t the only contributors to a local housing shortage, they certainly impact the number of homes for sale. As residents find it increasingly difficult to secure housing in strictly regulated cities — especially if they’re relocating for a job — real estate agents might find themselves just as pressed for homes as buyers.