December 17, 2021


An important real estate trend that I have followed closely is the national residential housing shortage.

This shortage has been driving up home prices across much of America for years. It is constraining economic growth and burdening young families.

Home ownership is part of the American dream. When buying a home in a desirable location is out of reach, young families take a big hit to their financial stability, careers, and happiness.

Housing developers are eager to build more homes and there is plenty of investment capital available to fund new construction. But there are a lot of obstacles, and high prices alone haven’t broken the floodgates of capitalism to accelerate new building projects.

A key roadblock has been government policy, especially from local city governments. Over my decades in the real estate industry, I have seen it all. Excessive zoning, burdensome regulations, inconsistent rules, and foot dragging bureaucracies. Much of this is driven by NIMBY policies. It is much harder to build something than it needs to be.

Of course, there are plenty of good reasons to be careful about development. For example, ecology risks can be a legitimate concern. And it’s easy to understand the desire of current residents to protect the culture of their neighborhoods.

But for America, the costs of not building are starting to add up. It’s affecting the next generation of prospective homeowners, and the economy at large.

That said, there are big differences in housing regulation around the country. Some states, particularly in the sunbelt, are doing much better. These areas are building more homes and people are voting with their feet.

At Alliance, we are following this residential trend closely. It is meaningfully connected to our commercial property business. For example, when we evaluate potential acquisitions, we study closely the supply and demand trends. When more people are moving to a certain area, that means more demand.

The bottom line is that bad housing regulation is making life harder and constraining economic growth. America is growth-oriented, and always aspiring to improve. When it comes to housing, America can do better. We need to build.

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