A Diverse Housing Ecosystem: Preventing Housing Collapse

We have an obvious housing problem. This is not a new problem, and by now most of us are certainly aware of this because the housing unit shortage in the United States impacts nearly every resident of this country every single day. The source of the problem can be traced back to a housing production gap between 1973 and 2023 that saw the nation failing to supply new housing at the necessary rate for half a century.

Today, even under the cloud of a struggling economy, the United States faces a massive shortfall of housing units. The deficiency is estimated to be between 4 million to 7 million units depending on the model you reference. The precise shortfall tends to fluctuate and is admittedly hard to pin down. But when we view the bracketed range in terms of our ability to close the gap, it becomes easier to grasp the relative insignificance of an exact deficit number.

In 2022 the United States spent an estimated $953 billion dollars on residential construction which equates to roughly 4% of GDP. The resulting 1.6 million housing units delivered represents a level of production not matched since 1973, and yet the US population has increased by 57% since then. In 2022, despite the near-historic levels of spending, production barely kept pace with the annual unit demand increase.

The conclusion from this is that nothing we are doing today or the rate at which we are presently doing it is going to be enough to solve the problem or even prevent it from getting worse. Simply put, until we fix housing supply, we cannot address housing affordability in a sustainable way.

To solve a problem this big we need to think very differently about how we are developing, designing, constructing, and consuming housing. Yet, our diminished ability to imagine and execute different housing possibilities is precisely why we are faced with this epic problem.

Almost all housing in the United States comes from the production of either single-family tract homes or big block apartment buildings. This is not a critique of those models of development; rather, the issue is that we do not build enough alternative housing types in large enough quantities to fit the ever-changing residential needs in and around the US.

There are understandable reasons for weighting efforts towards these two models. Tract homes and large apartment buildings are both highly efficient from a density and production standpoint. The weakness that both categories share is that they only work efficiently on certain types of land, and we are running out of parcels that will accommodate these models effectively. The competition for suitable land is fierce which is driving a rapid increase in the cost to produce housing. This specific skew is just one example of how the reliance on a limited number of model options stresses the system. There are countless others.

After thousands of years of humans of every culture producing housing in nearly every climate and location imaginable, we have somehow reduced all the previously developed strategies to two models at scale in the United States. It is a reality so absurd it might form the basis of a sci-fi movie if it were in fact fictional.

In our well-intentioned quest for efficiency, we have built a system prone to overwhelming stress and too simple to last.

If there is one key takeaway from the 20^th century, it is that sustainability is a product of diversification. Apply this principle to just about any topic you wish, your investment portfolio, energy production, wartime continental defense, environmental ecosystems, and yes land use among others.

The unbalanced pursuit of homogenous housing development is a strategic failure we have been unwilling to recognize and thus made little effort to mitigate. Its impact to the economy and society at large is difficult to overstate. It represents a massive risk we can’t afford to continue unchecked. The only viable path to creating a more resilient housing system and hedging against disaster is to provide more alternative housing patterns.

What we need is a diverse housing ecosystem with options that address a much wider array of people and lifestyle choices. We need a housing market that pushes towards sustainability free of costly artificial interventions necessary to prop it up. We need more complexity, not less, and we need it fast.

Big ideas will not be enough. There are very real and practical issues that cannot be glossed over and ignored as we work to pivot. The very first thing we must do is examine how we cope with risk.

Real estate development is a risky business. Presently, these concerns are managed mostly through the principle of repeatability. We rely on our knowledge gained from prior experience to guide our approach on the path of least resistance because it worked before, and should work again, right? If we can keep making slight adjustments to our baseline assumptions to account for current conditions, we gain a certain degree of predictability. Repeatability is effective, but generally counterproductive to creating diversity.

Nothing is more important to the effort to create diversity than the development of a novel risk management approach that allows us to explore fresh possibilities. We need a series of strategies that free us to consider and experiment with what has not been done before. We need a system to measure results so that we can identify new viable models. We need to be open to the idea that one of the best uses of public funds might be to incentivize invention. With each new success, we will create a host of new opportunities that broaden the underlying fundamentals of the housing system and bring it closer to sustainability where it can stand on its own.

Civilizations throughout history have been marked in part by how they build. We recognize human adaptation in the changing patterns of development. We have enjoyed a long period of relative stability in our approach to building, but the downside of this comfort is that we are operating within a system that was devised long ago under very different circumstances. The signs of systemic failure began more than half a century ago. We should be proactive in adapting and take hope in the knowledge that changing even a few parameters can have a massive impact.

Where will these evolutionary strategies come from? I will share some of Bergmeyer’s specific ideas in the future, but we should expect a vast degree of change that will usher in a new era for how we fund, design, and produce the built environment. It should not surprise us that the ultimate driver of this change is our fundamental need for shelter and home life, just the way it has been for thousands of years.