JANUARY 2022

The Affordable Housing Crisis
BY SARAH KITTLE
Gabe Gabriel
All around the world, housing
production has not
kept pace with population
growth. The lack of affordable housing
in the United States was an issue
even before the COVID-19 pandemic,
which transformed the way
we see and use our homes and caused
myriad supply-chain disruptions.
According to whitehouse.gov,
home prices outpaced income growth
for 2020. Researchers at Freddie Mac
estimated that the current shortage
of homes is close to 3.8 million.
In the metro Detroit area, realtors
have experienced single-family homes
going for tens of thousands of dollars
above asking, often in cash. Appraisals
and inspections are being waived,
and some homes are sold without the
buyer even seeing them in person.
How is the typical starter family supposed
to compete with that?
“The housing market has witnessed
many changes,” says Gabe
Gabriel, owner/broker at Strathmore
Realty in Farmington Hills, “specifically
in 2020 and 2021. Price, value,
size, demand and supply have all
changed drastically.” Some changes
are obvious, with higher home values
driving up the prices. “Price and
value increases ranged between 10
to 20 percent in the last year,” states
Gabriel. “The last four years has seen
a cumulative price increase of 40 to
50 percent.”
Demand has far exceeded supply,
and across the nation, home prices
have risen astronomically. “There is
currently one to two months of supply
for homes, where typically, you
would see about six months of supply,”
says Gabriel.
New homes are still being built,
but they more closely resemble the
“McMansions” of the ‘80s than entry-level
homes of the 1,400 square
foot variety. Less than 10 percent of
homes being built today fit into this
category. Labor shortages and the
rising cost of building materials are
also factors in rising costs. “People
working from home demanded larger
home sizes from which to work remotely,”
states Gabriel.
“People are staying put because
of COVID and therefore, creating
much less inventory,” says Jim Manna,
owner/broker at Level Plus Realty.
“And buyers are qualifying for
Jim Manna
mortgages because of the ridiculously
low interest rates.”
Renters are feeling the crunch as
well. According to a Harvard study,
one in four renters pay more than
half their income on rent, and nearly
half (47 percent) spend over the recommended
30 percent on rent and
utilities. Yet public housing stock has
been steadily decreasing since the
1990s. The New York Times (NYT)
says that rent has increased a staggering
11.4 percent from January
through August of 2021.
Adding to the issue, says the
NYT, is the phenomenon known as
“Nimbyism,” meaning, “Not in my
backyard.” This trend involves vocal
locals who object to the new housing
development, believing it will
devalue their homes and bring crime
into their neighborhoods. In California,
about one fourth of the cost of
building affordable housing is spent
on government fees, permits and
consulting companies.
This fight is one the Chaldean
Community Foundation knows all too
well. The recent groundbreaking of
their 135-unit affordable housing project
happened only after years of red
tape and legal wrangling. From hostile
hearings to stringent zoning laws, the
process was long and drawn out.
“Unfortunately, most developers
are in the game of making a profit
so finding affordable housing is very
difficult,” says Jim Manna. “The state
and federal government need to address
this by providing much needed
funding for developments like the
Chaldean Community Foundation is
currently building.”
Gabriel sees an end to the affordable
housing crisis in sight, if only we
could solve the labor shortage. That
affects the transportation costs, which
affect the raw materials cost. Says Gabriel,
“Fortunately, the low mortgage
interest rates increase affordability for
home buyers.” But the other side of
the coin is that the rates need to go
up to reduce the number of buyers in
order to get home prices back down to
more reasonable ranges.
“I don’t see a crash like in 2008
so it will be very tough to come back
down to affordable housing,” says
Manna. It will be interesting to see
how it all plays out.
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20 CHALDEAN NEWS JANUARY 2022