Inflation brings rising prices to just about everything it touches. Fuel prices are rapidly climbing to a national average of $5.00 a gallon. New home and resale prices are keeping a lot of people from buying the home they were ready to buy just 3 months ago.
Those new home buyers that were forced to abandon their hope of owning their own home have now turned to the rental market where they are willing to pay inflated rents just to have a place to live. But with all these new renters paying higher rents, where do current renters go when their rent is raised as much as 50% when it’s time to sign a renewal for their home or apartment?
Many of those are seniors living on fixed incomes and younger Millennials. Both groups are beginning to face the fact that they must move back home, seniors to their children’s homes and Millennials to their parent’s homes.
Mariotti Building Products
Viking Carrier
PFS CorporationBuilders and developers can’t build affordable housing fast enough to meet the demand and even if they could, the price of both affordable homes and apartments would continue to climb, and demand still wouldn’t be met.
Renters in staggering numbers are unable to afford market-rate apartments. Wage increases lag significantly behind the rapidly escalating costs of rent. Simultaneously, new construction for apartments has trended more toward luxury units in recent years, further deepening supply issues.
10 million low-income renter households routinely spend more than half, when they should spend no more than 30 percent, of their income on rent. While 30 states, the District of Columbia, and numerous counties and municipalities have adopted minimum wages higher than the federal minimum, the average minimum-wage worker must still work nearly 97 hours per week to afford a one-bedroom rental home at fair market rate, the National Low Income Housing Coalition reports.
Recently I received an email from a reader asking why modular factories don’t provide low-income housing. On the surface, it might seem like a fair question but the reality is that almost every modular factory is running at or near capacity building homes and projects that give them enough profit margins to keep the doors open. Having them switch to low-profit, high output low-income projects would have two major consequences.
First, the modular factories would have trouble staying in business if asked to lower their profit margins as their industry is already known for only making pennies on the dollar.
Secondly, who would be able to supplement the need for the higher-end housing and projects modular housing produces? Certainly not the existing on-site builders as they are the ones that can’t find enough labor or materials to complete what they already have under contract.
The Fed raising interest rates in the hope of slowing inflation might just be having the opposite effect when the demand for housing far outweighs the supply.
With the cost of building a new modular factory running into the tens of millions and the time needed to bring a factory to production taking up to 2 years, building more factories in the future for demand today is not the answer.
Besides, it would probably take more than 300 new factories just to make a serious dent in the demand for housing.
Government agencies, groups of builders and developers, and others are working to come up with answers and we should applaud their efforts but for now, it appears to be a continuing shortfall of housing leading to your children moving back into your basement for the seeable future or your aged parents taking over your master bedroom.
Related Articles:
The “Capacity Bubble” Continues To Hurt The Entire Construction Industry
Defining a Modular Factory’s Capacity is Complicated
The Curse Of Rich Vs Not So Rich In Affordable Housing Market
Gary Fleisher is the Editor in Chief of Modular Home Source and Offsite Builder. Email at gary.fleisher@imediagroup.com
To learn more about the Offsite Construction Industry, visit: Offsite Builder, the Construction Magazine for Builders and Developers
