I recently had a great idea that can ease the current housing shortage that we’re in. Are you ready for this? Okay here it comes.
Build more homes.
Sounds simple right? Unfortunately, not quite so simple. The builders face a number of challenges, and these challenges make it more profitable to build larger homes than to build smaller homes.
The first challenge is where will they build these homes? If you’re looking to build lower price, starter homes you need to build them near where the jobs are. However, the land to build these starter homes on is not available in many of the Metro areas. So if you don’t have the land to build in the Metro areas, you need to build further away from the Metro areas because that’s where the land is. But if people can’t get to work from those areas they’re not going to purchase those homes.
Their next challenge is financing. The small Community Banks used to do an awful lot of the financing for construction loans. However many of these banks are no longer there. And the larger banks are not quite as interested in lending for new construction. Add in the fact that government has enacted tougher lending standards, and this makes the cost of money to build these homes more expensive and more difficult to obtain.
Another challenge is labor, and this is a big challenge. Over the years I’ve been talking with contractors in various Industries and many, many of them say that their largest challenges s finding skilled labor. During the recession we had a number of years ago, many of these skilled laborers, the carpenters, electricians, plumbers, roofers etc. had to go find other jobs because there was a lack of work available for them. And not all of them have come back into the construction industry. And many of the ones who did stay in the industry are getting older and they’re retiring. And the kids today coming out of school all want a nice easy job where they sit at a desk in air conditioned comfort and work on the computer. They don’t want to go out and do the hard physical labor. And without skilled construction and trade workers it’s very difficult for the developers to actually build the homes.
Another challenge that builders face is the cost of the materials. Since you’re using the same types of materials and everything from starter homes to the higher price luxury homes, they are much more profitable when they build the larger homes. So this makes building those starter homes nowhere near as attractive to the builders