Housing affordability is a growing issue, and according to the latest National Association of Home Builders (NAHB) Home Building Geography Index (HBGI), exurbs—outlying counties of large metro areas with at least 1 million residents—were the only region that registered single-family permit growth on a year-over-year basis in Q1 2019.
"The HBGI is another indicator finding that housing affordability is a root cause of soft single-family permit issuance nationwide,” said NAHB Chairman Greg Ugalde in a statement. “A shortage of buildable and affordable lots is forcing builders to increasingly look further outside of suburban and metropolitan areas to find cheaper land that provides more building opportunities.”
Despite consisting of only 9% of single-family construction nationally, exurbs were the only region to show net single-family permit growth when comparing Q1 2019 data relative to Q1 2018, with a 1.6% gain. Other relatively sparsely populated areas, including small towns, rural communities, and outer suburbs of small metropolitan markets, have shown the largest annual single-family growth over the past four quarters, while other areas have shown either no change or declines.
“The HBGI data is consistent with the fact that housing costs are increasing fastest in large metro suburban counties and smaller metro areas with populations under 1 million where demand for housing is high but supply constraints are tight,” said NAHB Chief Economist Robert Dietz. “Supply-side issues that are hurting affordability and raising costs for builders include excessive regulations, labor shortages, rising material costs and a dearth of buildable lots in mid- to high population centers.”
Affordability is not only a problem for homeowners in many metro areas, but renters as well. According to Freddie Mac, the largest metro areas are the most rent-burdened.
“Rental affordability is a significant challenge for metropolitan areas across the United States,” said Steve Guggenmos, VP of Freddie Mac Multifamily Research and Modeling. “The vast majority of the units Freddie Mac finances are affordable. Even so, our research shows that supply just hasn’t kept pace with demand in many metros, and that’s pushing affordable rents out of reach for millions of American families.”