At Zillow Research, our days are fully consumed with bringing you the best, most interesting and most actionable real estate research around.
But to that end, we also find time to read a variety of reports, news stories and investigations, on any number of issues, from social justice, to economics, to real estate and sports. We read them for education, for entertainment and out of pure curiosity – and each one helps us discover new questions we want to answer and helps identify new trends worth following.
Zillow Reading List is a regular roundup of these interesting pieces we come across, with some thoughts about each and how it ties into our existing research and/or has spurred new questions. We’ll post these roundups regularly, and of course will continue to strive to publish research that is as enriching, thought-provoking and useful as these pieces have been to us.
Enjoy!
If You Build it (Affordable Housing), they (Big Companies) will Come
Bill Hethcok in the Dallas Business Journal
It’s easy to be cynical about large corporate relocations, and assume the main reasons for the move are self-centered – to avoid taxes, maybe, or to find cheaper labor. But the motivation was different for Toyota’s recent decision to move from California to Texas: The automaker says the move was driven by a desire to find affordable housing for their workers. Homeownership remains a big part of the American dream, but in many areas owning a home may be moving beyond the grasp of the middle class. This move is the first time we can recall employers on this scale trying to address the issue for their workers. Toyota says it will keep employee salaries the same as the company moves from an expensive housing market to a more affordable area, with the explicit aim of helping employees find affordable housing. If affordable housing really is the the goal, then Toyota made the right move, at least according to our data. In the Los Angeles area, the median family would need to spend 40 percent of their income on a mortgage payment for the median L.A. home. The typical family in the Dallas area, on the other hand, only needs to shell out about 13 percent of their income for a typical Dallas home.
Rethinking the Federal Bias Toward Homeownership
Edward L. Glaeser in Cityscape
Time and time again, Harvard economist Ed Glaeser has established himself as the country’s leading intellectual iconoclast of housing and urban economics, and the Zillow Economic Research team has long admired his work (and has been honored to have him participate in past Zillow events). In his most recent article, Professor Glaeser challenges readers to consider the inadvertent consequences of the federal government’s policies that promote and subsidize homeownership. These policies may end up encouraging the overconsumption of housing, energy and automobiles, and could result in a bias toward suburban, single-family living. In searching for solutions, he calls for the federal government to be more evenhanded in its policies and less meddlesome in Americans’ choices on how and where to live. For local governments, he emphasizes the importance of easing regulations that limit the supply of multifamily housing. He also suggests there may be a role for the federal government in encouraging local governments to ease regulations and expand housing supply through a competitive grant program similar to the Department of Education’s “Race To the Top” program, launched to promote innovation in education.
Is Government Regulation Driving Inequality?
Jason Furman in remarks to The Urban Institute
Glaeser’s ideas have a supporter in Jason Furman, chairman of the Council of Economic Advisors. In recent remarks to The Urban Institute, Furman called for a supply-side solution to the nation’s housing woes. For many years during the bust, the problem was too much supply – specifically, too many vacant and foreclosed-upon properties that dragged down the value of nearby, otherwise sound homes. But as the recovery has progressed, we have quickly found ourselves facing the opposite problem – too little supply, especially in a handful of high-demand metros. Furman suggested that land-use regulations in those areas are a chief culprit behind the low supply of homes for sale – and that this is a problem for more than just housing values. Reduced housing supply is reducing mobility and contributing to the rise in inequality in the country, Furman suggested.
How do we Know the Rent is ‘Too Damn High’?
Daniel Hertz in City Observatory
Over the past few months we’ve spent quite a bit of time diving deep into a topic that is near and dear to our hearts: The right way to construct a housing index, in this case, for rental prices. As this article points out, the easy option is to track the average listing price of rental units on the market. And while that it is useful information, it is important to remember that the set of what is listed tends to change significantly month-to-month, especially in fast rental markets. So, you may be comparing one-bedroom apartments in one month to two-bedroom units in another without even knowing it.
At Zillow, we tend to favor a hedonic approach to tracking housing values or rent, which looks at what every unit would potentially rent for (regardless if it’s currently for rent) and tracking that over time, so the population of units being considered stays constant. To do that, you need an idea of what all those units would rent for, even if they aren’t in a market, which is where our Rent Zestimate comes in.
Another popular approach is a repeat sales methodology, utilized by our friends at StreetEasy and a subject of interest in recent research. Repeat sales methodologies track the same property over time and see how much rent has increase for that unit, giving a sense for how the market as a whole is changing.
Mona Chalabi in FiveThirtyEight
Finally, there are few things in life we appreciate more than a good statistic – so we had to share this stat from the good folks over at 538. The data says the average American moves 11.4 times over the course of their life – which actually feels surprisingly low. A quick poll found that the 20- and 30-something wunderkinds that populate Zillow HQ had already moved 9, 11, and 13 (twice) times. But the statistics are also clear that the wealthiest Americans move less frequently. So, maybe the lesson is that Zillow needs to start paying us more so we can settle down and stop moving?