Addressing the Affordability Crisis

ADUs and multigenerational homes serve as short-term solutions for the low housing stock and affordability crisis.

By Yvonne Nguyen

The volatile housing market, high inflation and mortgage rates, lack of housing supply and increasing home prices all resulted in housing affordability falling to its lowest point since 1989.

It’s no secret that we are in the midst of a housing shortage largely due to supply delays and high construction costs, leaving prospective buyers to remain as renters or move in with their families. Data from the National Association of Homebuilders (NAHB) shows that building materials have increased by more than 30% since January 2020 with construction costs adding upwards of $14,000 to the average price of newly built single family homes. 

“Declining affordability has also pushed builder sentiment down for seven consecutive months and NAHB is projecting a net decline for single-family construction in 2022 as the housing markets slow due to ongoing affordability issues stemming largely from supply side challenges,” said Robert Dietz, chief economist for NAHB. “Policymakers need to focus on mending broken building material supply chains and reducing ineffective zoning and other regulatory policies to help bend the cost curve and enable builders to boost attainable housing production.”

That’s not to say that the Biden administration and state governments have not made any efforts to address affordable housing in their jurisdictions.

The Build Back Better Bill was introduced by the Biden administration in 2021 to support housing by providing funds for the construction and development of affordable homes. The program contained more than $170 billion in housing investments, including affordable housing development through the National Housing Trust Fund to provide renovations to the nation’s public housing.

In addition, the Housing Supply Action Plan, introduced in May, called for the creation and preservation of hundreds of thousands of affordable housing units over three years. In a statement from the administration, this plan is touted as the most comprehensive of all government efforts in history to close the housing supply shortfall.

New York Governor Hochul announced a $25 billion, five-year housing plan that will create or preserve 100,000 affordable homes across the state. While policymakers are working toward closing the affordability gap, there are different solutions that builders can implement in the meantime. 

An Alternative Approach to Building Single Family Housing

Though accessory dwelling units (ADUs) are not a solution for everyone, whether it’s due to zoning policies, lack of permits or conflicting legislation, it is a great start to addressing the affordable housing crisis, especially when it is exacerbated by a lack of housing inventory.

ADUs can instantly create density and encourage infill development. Building all types of houses is the best way to alleviate housing costs, provide more housing opportunities at a reduced price and benefit both homeowners and tenants all while maximizing the livable space.

As Daniel Gehman explains in his column, these types of home sites are considered naturally occurring affordable housing. “A tremendous advantage of this approach, from a housing point of view, is that it can as much as double the number of dwelling units provided within the same net site area, at a variety of sizes and price points that makes them attractive for those with moderate incomes,” Gehman said. 

Multigenerational Living on the Rise

According to the National Association of Realtors, the demand for multigenerational homes increased 15% in 2020. Whether that’s a direct result of the pandemic, rent burdened millennials moving home due to housing costs or the aging population combining households with their families for eldercare, multigenerational housing is becoming more common. 

This type of housing helps to offset cost and what was once considered as an “add-on” or a future renovation project is now a feature that is offered from the start. With production builders like Lennar offering Next Gen floor plans featuring a private suite with separate entrances that can accommodate a multi-generational household, it’s safe to say that the trend is here to stay.   

While both ADUs and multigenerational homes serve as short-term solutions for the low housing stock and affordability crisis, they also go a long way in benefitting the aging population in the current market.  

As the Housing and Urban Development’s Office of Policy Development and Research explains on their website, “breaking down barriers to ADUs and constructing multifamily, multigenerational housing are among the strategies that communities might pursue to accommodate the housing needs of an aging population and an increasing number of multigenerational households. These options give families greater flexibility to cope with changing health needs, affordability pressures, childcare needs, social isolation, and other challenges.”

Yvonne Nguyen is Editor of Builder and Developer magazine. She can be reached at yvonne@builder.media.