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As is clear to many of us, inflation impacts all income groups, although those with less income always suffer the most since they have fewer ways to reduce costs of living.
The ESP Team has been focusing on the high costs of housing, both rented and owned, over the past few months. Some people have asked, why are housing costs so high? Actually, as is often true, the answer is simply supply and demand.
Currently the US is facing a huge housing shortage and has been for some time. Why is this? First, there is a shortage of building materials and the parts and appliances that go into homes, such as doors, windows, and dishwashers. The COVID pandemic shut down many businesses that produced these products and supply fell. More important, the housing collapse of 2008 resulted in many homebuilders going out of business and the tradespeople who worked for them found other employment. This resulted in a decrease in the supply of housing just as the millennials started to settle down.
Even though home building is now on the rise again, another big roadblock is a combination of a limited supply of land and restrictive zoning in many areas. A builder may be able to build five homes on a given piece of land, but that land may be zoned for only one or two houses. This limits the supply and increases the costs. Restrictive zoning laws mean multi-unit structures will not be built in many neighborhoods that prefer to maintain only single-family dwellings. There may be solutions. See LINK