At first glance, rising home prices may appear to signal the economy is booming and household incomes are increasing.
Look a little closer, and that just isn’t the case.
A recent study shows home prices in the Grand Rapids metropolitan area are expected to maintain their upward trajectory again this year, increasing by another 6.5% after growing by 6.8% between 2019 and 2020.
The reason: We haven’t built enough housing to keep up with demand at all price points. Add to that regional wage growth hasn’t kept pace with the rise in housing prices and zoning laws have limited our ability to meet the needs of our growing communities, and it’s clear why residents at all income levels can’t find housing within their price range – also known as housing affordability.
Housing affordability is the amount of money we spend on housing relative to our income. Housing is affordable when it costs 30% or less of a household’s gross income. This includes mortgage, rent, taxes, insurance, etc.
Why it matters to everyone
To prosper, all people and all places need housing for all income levels. High-quality, stable housing at all price points is central to the health and wellbeing of all of us. Communities with enough housing at all price points offer greater economic stability, better health and greater access to quality education for all residents.
When we don’t support housing supply at all price points, tremendous strain is placed on the social support systems we all depend on and each of us is impacted. Health care, education, public safety and regional economic competitiveness are all affected by the ability of residents to find housing within their price range.
As long as demand for housing continues to outstrip the available supply, housing prices will continue to rise and we won’t be able to provide a high quality of life for all.
So how can we make sure our communities offer enough housing for all income levels? We need to put the pieces of responsible community development together. Think of it like a puzzle that requires multiple sectors to solve it: government, developers and nonprofits.
Government decides the regulations and zoning that set the borders of the puzzle. Developers decide where commercial pieces go. Nonprofits make sure all the puzzle pieces are seen and assembled in a way that ensures the community is a fair and functional place.
Working together, we can reduce regulatory barriers that impede the creation of new housing and find opportunities to allow for more housing that aligns with the community’s vision for its future.
It’s a simple matter of supply and demand – an adequate supply makes housing more affordable at any price point. In other words, we all win.