- The world is trapped in a housing shortage, and governments are stepping up to solve the problem.
- The pandemic sparked a global buying spree, but a lack of available homes has sent prices skyrocketing.
- Millennials are demanding help as they face being locked out of the market during peak homebuying age.
- See more stories on Insider’s business page.
Prospective homebuyers are at their wits’ end, and not just in America. After the pandemic revolutionized the real-estate market – corresponding to record high prices – the next chapter of the story is a revolt by homebuyers around the world, demanding a housing market that works for everyone.
The story of housing in America echoed around the globe. An intense buying spree early in the pandemic snapped up home supply, leading to bidding wars that pushed prices higher at record speed. By the end of September, Americans’ hatred of the US housing market was the most intense since 1982.
Global home prices surged at the fastest pace in four decades through the first quarter of 2021, according to JPMorgan economists. Shortages and fervent demand drove home inflation higher in Australia, New Zealand, Brazil, Germany, Korea, and Turkey, just to name a few.
The problem isn’t necessarily affordability, Logan Mohtashami, lead analyst at HousingWire, told Insider, noting mortgage rates are at historic lows around the world. The global market just doesn’t have enough homes.
“That’s the discussion that gets lost. We talk about an affordability crisis, but if we had an affordability crisis, none of this would be happening,” Mohtashami said, referring to the surge in homebuying. “The real way to solve this is through the production of homes. You just have to build.”
The problem is that builders “don’t care about the housing shortage” and “they never will,” Mohtashami said. That’s where activists around the world are demanding that governments step in, because the market is serving the homebuilders and the realtors and the sellers, and not the people who can afford to buy new houses. The shortage needs a structural fix, they argue.
And it needs a fix soon. The world sits at a critical juncture as millennials – the largest adult generation – enter their peak homebuying years. The group’s finances have already been rocked by the Great Recession and COVID-19, leaving them further behind than previous generations. Failure to solve the home shortage could leave millennials permanently on the back foot.
As the housing shortage lingers, authorities around the world are rethinking the market from the top down. A generation’s economic future hangs in the balance.
America’s generational war of NIMBYs vs. YIMBYs
Every country’s housing crisis looks slightly different, and so does each government’s response.
In the US, federal lawmakers are proposing a historic construction drive. The $US3.5 ($AU5) trillion spending package championed by President Joe Biden and Democrats in Congress includes $US213 ($AU287) billion for affordable housing. The Department of Housing and Urban Development estimates the plan could create more than 2 million homes and take a significant chunk out of the country’s 6.8-million-home deficit.
It may be a case where throwing money at the problem works, Mohtashami said.
“You really need the government to just start paying people to build homes and not worry about their margins. Then the production can happen,” he added.
At the local level, boomers and millennials on opposite sides of the issue – the haves and have-nots, essentially – have split into respective camps of “not in my backyard” or NIMBYs and pro-development YIMBYs. The YIMBYs – short for “yes in my backyard” – have more momentum than ever.
Berkeley, California, which pioneered exclusionary, NIMBY-friendly, single-family residential zoning in the early 1900s, just rolled back the policy in March. Before, the city limited the number of households per lot in terms that explicitly discriminated against minority communities, especially Black residents, and now it’s moving to allow in-demand areas to double their housing capacity.
The same type of zoning was banned statewide in September; it’s estimated to create 700,000 more units statewide every year, a huge change for California’s average of just 100,000 new units each year.
Efforts farther afield
Instead of a construction surge, Canada is pushing more targeted policies to support buyers. Prime Minister Justin Trudeau announced in August he aims to ban blind bidding, a process that keeps buyers from seeing other buyers’ offers.
The prime minister also aims to outlaw the buying of Canadian homes for investment purposes, with financial firms under increasing criticism for the larger role they’ve played in major countries’ housing markets.
On the other side of the globe, New Zealand Prime Minister Jacinda Ardern’s latest housing plan includes stricter rules for investors selling homes they don’t live in, and she has ordered New Zealand’s central bank to formally consider home prices when setting interest rates. The move marks a major shift for a central bank, and suggests other countries could start factoring housing into they way they set monetary policy.
Activists in Berlin want the government to buy housing itself. In September’s city election a majority voted for the government to buy apartments from the country’s biggest landlords to bolster the supply of publicly owned housing. The rule could affect up to 240,000 Berlin apartments.
Whatever happens from here, one thing is clear: Homebuyers want a new housing policy from their governments, and governments are listening.