Shortage of startup homes keeps many young Americans from owning homes: NPR
AILSA CHANG, HOST:
It is difficult to buy a house right now. The country is short of nearly 4 million on-demand homes, and it’s especially tight in this corner of the market that once launched the American Dream, the home of departure. NPR’s Uri Berliner reports.
URI BERLINER, BYLINE: Matt Pergens installs and repairs garage doors in Reno and surrounding areas, Nevada.
BERLINER: He’s very busy. The houses grow there like wild flowers of the desert. Lots of buyers – they’re Silicon Valley tech workers, snapping homes over a million dollars.
MATT PERGENS: Some of these people are – just on their garage doors, they spend $ 10,000, $ 15,000, $ 20,000 a piece on those garage doors.
BERLINER: Custom cedar and polished copper garage doors. Pergens does not complain about it. He thinks it’s good when people get rich. But the way things are there, he doesn’t stand a chance of owning a house.
PERGENS: We’re building all these fancy, chic houses and low income apartments, and there’s absolutely nothing – nothing – in between.
BERLINER: Home values in Reno increased 27% last year. Pergens and his wife are tenants. She stopped working as a pastry chef during the pandemic. They have a 6 year old daughter and another child on the way. I asked him what he longs for, and he didn’t say anything extravagant.
PERGENS: I would love to have a space with a yard that I could call mine – like, 900 square feet, simple cabinets, simple counters, with shag carpet. I do not care. I just want four walls and a roof that I can afford.
BERLINER: This house that Pergens describes is on the verge of disappearing in America. In 2020, the number of starting homes built was less than one-fifth of the annual average of the early 1980s.
SAM KHATER: That’s a huge problem if you think about the fact that home equity makes up the bulk of the wealth of the overwhelming majority of Americans.
BERLINER: It’s Sam Khater, chief economist at Freddie Mac, the government-backed mortgage company. Traditionally, Americans have started to create this wealth by buying a no-frills first home. Freddie Mac defines a starter house as 1,400 square feet or less. Others define it differently. But on the question of why they are so rare, there is a lot of agreement. The high price of building materials – labor costs are on the rise – zoning regulations restrict construction, and that’s important, Khater says.
KHATER: It’s really the value of the land that matters most when it comes to the price of a house.
BERLINER: Now America is a huge country with a lot of open spaces. So why should the earth be so expensive? Well, it’s not that plentiful in the places where the jobs are and where people want to live.
KHATER: You know, a lot of people try to cram into the same cities that are the most productive and the richest and that offer the most opportunity. But high and unaffordable home prices prevent many Americans from doing so.
BERLINER: When land is expensive, it becomes more difficult for builders to monetize entry-level homes. Greg Ugalde is building them in suburban Connecticut, but he says …
GREG UGALDE: It’s getting harder and harder, and more and more manufacturers can’t do it anymore.
BERLINER: You can often squeeze in, he says, saying no to extras, like upgraded cabinets and counters and area rugs. A place like this sounds great for Matt Pergens in Reno. When he looks around, however, he sees no sign of saving.
PERGENS: Homebuyers seem to be obsessed with this idea of luxury amenities, and home builders are quite willing to give them that.
BERLINER: The numbers confirm it. Less than 6% of homes built in Nevada last year were entry-level homes. Pergens says he would gladly pass the floor-to-ceiling windows and stainless steel appliances of a small house, the leafy patch in the back yard, a place where he could build a treehouse for his daughter.
Uri Berliner, NPR News.
NPR transcripts are created within an emergency time frame by Verb8tm, Inc., an NPR entrepreneur, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative recording of NPR’s programming is the audio recording.