“We need more affordable housing!” So goes the cry in the country. I think we need to review those words, and their connotations. A different emphasis may be more useful. And that ‘we’ can include me – if I had to sell my house.

(Required disclosure: I am a licensed real estate broker (as well as many other things) on Whidbey Island with Dalton Realty, Inc.)

Affordable housing is banner topic, a flag flown at marches, something to be debated at many levels of government. Unfortunately, the interpretation has a flaw. In general, everyone who has bought a home and not defaulted has at least some measure of affordable housing. That includes multi-million dollar estates. A property that sells for $6M was affordable for someone. We have millions of homes. We need millions more, but we also need something else.

It is easy to advocate for more houses. More houses means more jobs, more real estate sales, more property taxes. Very popular notions. My business would appreciate it. 

Unfortunately, the issue behind ‘affordable housing’ is that for many people housing is not affordable. One hypothesis is that adding houses (supply) will reduce prices. If every house went to a different homeowner, that would at least be more feasible. But that assumes the increase in supply will significantly reduce the price of housing. There’s no guarantee that such a thing will happen. 

I live in an area where the prices have gone up ~15% during the pandemic. Since 2010 median sales prices rose 59.6%, locally. I’m confident that wages haven’t gone up as much. In the US in the ten years prior to the pandemic housing prices rose 55.9% while wages rose 11.4%. That’s a hard gap to fill simply by building more houses.

I live in an area appealing to vacationers and retirees. I moved here because I was a retiree (and unfortunately became un-retired, hence the real estate gig. A very long story.) I’m one of ‘them’ and look forward to being so again. According to previous census data, about 27% of the houses in my area are considered vacant because they are vacation homes. There is also a world-wide trend called ‘ghost homes’, homes that are purchased as an asset, a house bought as if it was stock, bought for price appreciation. Some houses are bought as rentals, but they’re not included. Ghost homes are bought to sit and eventually be sold. Renting out a ghost home can provide income, but managing a rental and a renter takes effort while also adding risk of damage. So, they sit empty. The Washington State average of vacant homes is just under 10%. Some even trendier places exceed this 27% Aspen was as high as 40%.

Which is easier, increasing the supply of homes by building more, or encouraging vacant homeowners to rent or sell their homes? My business benefits from more houses for sale and I am glad for it, but simply adding more houses are only one thing to adjust if we’re also going to help my friends who are trying to improve their housing situation.

Unfortunately, there can be an unexpected consequence of the economic nature of buying houses. If there are multiple offers on a new house, someone who can pay cash for more than the house’s listed price can outcompete against anyone who used every bit of leverage to qualify for a mortgage. The cash offer may be a yet another vacation house, while the mortgaged offer may for someone’s first house. Purely by the financing, cash wins. Increasing the number of houses doesn’t necessarily increase the number of homeowners. Another house is built, but the housing situation hasn’t changed. 

Affordable housing can concentrate too much on ‘housing’ and not as much on ‘affordability’. Affordability can have more to do with wages than houses.

Pardon me as I repeat the data from above. If housing expenses, whether to rent or buy, increase by 10% but wages only increase by 9%, then housing has become less affordable. Until wages increase by more than housing prices and rents, then affordability decreases. In the ten years roughly from 2009 to 2019, wages increased 11.4% while median home prices rose 55.9%. That’s a lot of catching up to expect from building more houses.

It is easier, however, to convince communities to build more houses than it is to convince businesses to raise wages. It also seems to be easier to build more houses than it is to change regulations. So, we build more houses.

As a broker, this may be why I’m hearing from more buyers who want to build or buy houses that others might not want: fixers in terrible shape (but cash is required), tiny houses (if only they can find agreeable municipalities), RV pads or even just RV parking places, yurts, tipis, unconventional materials, unconventional shapes, creative architecture that only unconventional people can appreciate. I like the unconventional. I like creative solutions. But for many of those buyers it is not a question of style or expression but a fundamental desire to own their own home.

For them, it is easier to explore alternative housing solutions than find more affordable incomes. The hurdles of conventional regulations and finances are definitely non-trivial, though.

I watch the value of my house appreciate. It is a small-ish (868 square feet) beach cottage with a nice view. If I sold it, however, I’d have to move about a hundred miles to find something similar and affordable. Even rentals are hard to find that far out. High-speed internet makes some jobs more feasible, but real estate businesses are hard to move. Yet, with so few houses on the market, the business model of a real estate broker is also being challenged which means staying place is also a challenge.

I don’t expect a change. It is too easy to lobby for more houses even if those houses don’t address the core problem. Lobbying for higher wages may help, but the disparity is so great that I suspect all we can do is narrow the gap, not close it.

It is a dilemma, but that is true throughout our economy and society. I don’t have the answers, but I do have at least this suggestion – that affordable housing has more to do with raising wages to become affordable than it does to building enough houses to have enough excess to satisfy everyone – including the people who are working to find a better place to live.