Citing research published in April 2024 from the University of Kansas based on 20 years of data:
“Kirk McClure, professor of public affairs & administration emeritus at KU, and Alex Schwartz of The New School co-wrote a study published in the journal Housing Policy Debate. (Also see Fortune article.)
They examined U.S. Census Bureau data from 2000 to 2020
to compare the number of households formed to the number of housing units added to determine if there were more households needing homes than units available.
“Although various studies indicate that the nation has a shortage of anywhere from 2 million to 4 million units, Census data show little evidence of a shortage.”
“There is a commonly held belief that the United States has a shortage of housing. This can be found in the popular and academic literature and from the housing industry,” McClure said. “But the data shows that the majority of American markets have adequate supplies of housing available. Unfortunately, not enough of it is affordable, especially for low-income and very low-income families and individuals.”
– end quote
The peer-reviewed study, published in April 2024 in the academic journal Housing Policy Debate, found that between 2000 and 2020, the U.S. had a surplus of 3.3 million homes—defying conventional wisdom that the nation is facing a housing shortage.
Debunking The Housing Shortage Myth!
So where do some people get the idea that there is a shortage of housing? Prominent real estate website Zillow.com is the most visited real estate website in the US. Zillow has been cited by some news outlets, including the Denver Post, as proof of the ‘housing shortage’ including citing Zillow’s radical claim of 4.5 million ‘missing’ homes.
The Denver Post is now owned by Alden Global Capital described by The Atlantic as a secretive hedge fund that is gutting newsrooms. The Atlantic reports that under Alden’s ownership, the Post’s staff was cut by two-thirds, evicted from its newsroom, and relocated to a plant in an area with poor air quality, where some employees developed breathing problems.
“Those who know anything about local journalism in America are in general agreement: Being bought by Alden is the worst possible fate for the newspapers and the communities involved,” said media writer for The Washington Post Margaret Sullivan.
“Colorado journalists are among those journalists warning the nation that sources of fact-based news are besieged by revenue-hungry financial “vultures” intent on stripping assets and profit from the nation’s news organizations. They lay off staff, consolidate departments, sell off building assets, and leave the fact-based news organizations crippled shells of their former selves. They do it in the name of shareholder profit.”
Perhaps we should not be surprised The Post would fall victim to the convenience of reporting on the poorly conceived Zillow housing shortage model.
Critical Flaws of the Zillow Model
- Zillow does not give credit for housing where unrelated people already live.
- Zillow requires enough housing for all unrelated persons in the US to live alone ( ‘on their own’).
- Unrelated roommates are not allowed.
Zillow is not a stranger to failed algorithms. Zillow lost $880 million dollars with their Zillow Offers business that attempted to buy and sell homes at a profit. But Zillow was very wrong in their pricing model and closed the business in 2021. Zillow’s publicly traded stock (NASDAQ: ZG) lost over $20 billion in market capitalization and Zillow cut about 2,000 jobs!
Zillow states that only two factors comprise their housing shortage model:
“The deficit is defined as the difference between two factors: the number of families who were likely to be seeking their own home and the number of homes that were available for rent or sale. At any given time in 2022, there were about 3.55 million vacant homes available for sale or for rent. At the same time, there were approximately 8.09 million individuals or families living with non-relatives, potentially preferring to live on their own – a difference of more than 4.5 million so-called “missing homes.” – end quote
So the Zillow housing shortage is based on how many unrelated people are living together! Plus the incredible assumption that each and every one of these folks do not like their housing situations and would prefer to live alone rather than with non-relatives which is the only way they can come up with the 4.5 million ‘missing homes’ number. That is IT, folks! That is the Zillow model.
According to Zillow, we need enough housing so that everyone living with a non-relative can “live on their own”. Although these people are already living with someone else, Zillow calculates the housing needed based on all of them living alone or ‘on their own’.
Therefore, for everyone to live on their own, we need at least a rental studio apartment or a for sale condo for EVERYONE in the country not living with a relative. In that perfect world, nobody should ever have a roommate! Because if they have an unrelated person as a roommate, that creates two additional ‘missing’ households under the Zillow model and the need to build two more housing units!
Consider the following example.
Hypothetical Example: Consider an imaginary town that has a zero percent vacancy rate. Two people not related by birth, blood or marriage live together. Voila! We now have TWO MISSING HOUSEHOLDS according to Zillow! And now the local city council has to relax zoning and building standards to deal with this urgent problem. That’s how it works. Not just in this example, but all over this country!
And notice, Zillow is talking about people who actually HAVE housing that are creating the shortage.
Back to our example of two unrelated people living together. These could be two friends. Two college roommates. Two airline pilots saving on rent. Two people romantically attracted. Whatever. Now let’s say they live in a 2-bedroom apartment with separate bathrooms. And they are happy with the arrangement. According to Zillow, they still represent two ‘missing’ households that therefore need more housing to be built as a policy imperative.
And the Zillow model does not give credit for housing where people already live. Remember – Zillow only considers two factors and credit for current housing is not one of those two factors. And since the town has a zero percent vacancy rate, according to Zillow we need to build two additional housing units to house these two people who have housing!
So instead of just one 2-bedroom apartment, we also need two additional housing units just to house these 2 unrelated people under the Zillow model!
In other words, 4 bedrooms and three separate dwelling units to house two people! Wow!
Let’s say we have 100 unrelated people living in 50 2-bedroom apartments. According to Zillow, we would have 100 ‘missing’ households that our society needs to build additional housing for. Even though many of these people, possibly most or ALL of them want to stay put in their current housing, Zillow still defines them as missing households. Even though these folks are housed with separate bedrooms and bathrooms, according to the Zillow model, we would still need 100 additional housing units! (If there were 25 vacant units for rent in the town, we subtract that number from the 100 missing households but still have 75 missing households.)
That would be 200 bedrooms required to house 100 people under the Zillow model!
And the Zillow model does not give any credit for the housing where these unrelated people already live! Remember that two unrelated people living together count as two missing households because Zillow assumes all unrelated people want to move out. Since their current apartments are not for sale or rent, Zillow’s model does not generate an offset to the amount of new housing that needs to be built for these two ‘missing households’!
Not having a reasonable allowance for housing where people already live contributes to the inflated number of ‘missing’ homes Zillow calculates we need to build.
And it appears city council members and mayors sometimes believe this type of junk science coming at them from biased housing industry participants like Zillow and perpetuated by hedge fund newspapers like the Denver Post and others who receive significant advertising dollars from the housing industry.
Unfortunately, policymakers such as the governor, legislators, city planners and council members may see this ‘news’ reporting and may incorrectly assume there is urgency to increase the supply of market-priced housing when in fact we already have an adequate supply.
The problem is actually about affordability. Continuing to build more unaffordable market-priced housing does not help bridge the affordability gap. Because the Zillow model produces such a wildly inflated housing deficit, their fake shortage fuels the misinformed build, build, build mentality.
https://nlihc.org/gap/state/co
Now you know! Zillow uses unfounded assumptions that are debunked by the University of Kansas research that uses solid US Census data spanning 20 years! Zillow is also debunked by analyzing the only two factors that comprise their model.
The next question?
What if builders build too many units? Won’t housing prices decline so drastically, we will then have a supply of affordable housing?
That is not likely to happen. Because developers watch market and economic indicators, they will stop building new units before the indicators get too negative for profitable sales or leasing of new units. As a result, prices may decline slightly and benefit buyers and renters with higher incomes. But it is unlikely that an overbuilding trend will ever produce enough surplus units to create a significant inventory of affordable homes.
As proof that developers do adjust their plans, the chart shows how construction starts for apartment buildings in the western US have declined as construction loan interest rates have increased.
What does this have to do with the Belmar Park West multifamily project?
Just more proof that we do not NEED the BPW housing project because there is no market-priced housing shortage in Lakewood. Some people (and certainly social media developer shills) express that we need any and all new housing to come online and they may cite Zillow. But the KU research and other articles on this blog prove that we don’t need more luxury housing in Lakewood. Lakewood’s own Housing Study states there is a 10-15 year supply already approved or under construction.
Now you know. Do something about it!
Other methodologies: https://www.jchs.harvard.edu/blog/estimating-national-housing-shortfall
