As 2017 comes to an end, we decided to round up some of our favorite studies and reports from the past year. We use public data as well as data from BuildZoom’s national building permit database to better understand the construction market, and this year our work fell into two broad categories:
- Research concerning urban growth and housing affordability, and how they relate to construction and housing supply.
- Reports on individual construction projects from across the country that we believe are particularly interesting to the public.
Urban Growth and Housing Affordability Research
In order to keep housing prices in check, a metropolitan area’s housing supply must keep up with the demand for living there. We began studying the housing supply in 2016 by focusing on its relationship to metropolitan expansion. Two studies which examine the expansion and densification of U.S. metros conclude that, while the large and growing metros of the South are able to maintain housing affordability by continuing to expand their developed footprint, the expensive coastal metros face an affordability crisis because, since the early 1970s, they have slowed down the pace of expansion while failing to compensate for it with greater housing density. In so doing, the former group of metros have channeled their economic strength into population growth, whereas the latter have channeled it into housing price appreciation.
In another study, we related the sluggish recovery of new home construction since the last decade’s housing bust to its location inside metro areas. Among other insights, the study suggests that the shortage of lots which developers raise as an impediment is actually a matter of perception, driven by the increasing draw to build in locations deeper in the metropolitan interior, where vacant lots are in fact more scarce.
At the Wall Street Journal’s request, we ranked the metro areas and zip codes in which it is toughest to build. We discovered that the toughest places to build are not in downtowns but in the innermost suburbs. The demand for living in the innermost suburbs is high, but the ability to build new homes there is more constrained than in downtown because raising the housing density is generally not allowed.
Paying For Dirt is the name we chose for a study in which we examined the relationship between home values and construction costs. The study explains what can be learned from a discrepancy between the two, or a lack thereof. Because the study drills down to the zip code level, it helps identify areas in which restricted housing supply is excluding people, even inside metros which are otherwise affordable. The following map, for example, shows that even the laissez-faire Houston metro area has districts in which unrestricting the housing supply by allowing greater density would prevent exclusion.
The State of California, whose coastal cities suffer from some of the worst housing affordability in the nation, recently passed legislation intended to increase the housing supply by easing the way for new “Accessory Dwelling Units” (ADUS), also known as in-law units or granny flats. To help inform the public, we compiled a plain-language guide to the legislation and examined building permit numbers for ADUs in the City of San Francisco. We found that permits spiked immediately following the last piece of legislation, and we will need to revisit the subject after some time has gone by for it to play out further.
Influential Construction Projects
BuildZoom’s national building permit database contains more than 120 million permits. It provides us with unique insights about the construction market and helps us keep a pulse on interesting construction projects that are underway across the nation – from local restaurant openings to new permits being filed for Tesla’s Gigafactory. Our two favorite stories from this year involve Apple Park and Amazon’s Seattle HQ1.
For Apple Park we estimated the permit-based cost for each of the 15 major structures and determined that the total – a lower-bound for the actual cost of the project – was $1.15 billion.
After the announcement of Amazon’s quest for building a second headquarters, dubbed HQ2, we took a look at Amazon’s current presence in Seattle. Our report shows that since Amazon’s big move to the South Lake Union area in 2007, over $1.9 billion in building permits have been filed for nearly 13.6 million feet of present and future Amazon-occupied office space in the Seattle metro area.
There’s more…
In addition to the main themes, this year we also studied how the timing of residential renovation relates to home sales and what factors underpin the intense shortage of construction labor that is hampering the industry. Last but not least, last week we released a new study examining the flow of people in and out of the San Francisco Bay Area in collaboration with SPUR.
In the coming year we shall continue our exploration of construction-related themes, and we look forward to sharing our insights with you. Stay tuned!
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