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12 PLANNING COMMISSIONERS JOURNAL / NUMBER 78 / SPRING 2010 PLANNING PERSPECTIVES Future Housing Demand: PROBLEM OR OPPORTUNITY by Beth HumstoneHow many times has your commission heard, “But there’s no market for that development,” “People want a big home on one acre,” or “It’s more affordable to buy a house out in the country?” In the past it was com- monly accepted that suburban or fringe housing on large lots was where most of the housing market was focused. But the recent housing foreclosure crisis, coupled with high unemployment and rising energy costs, has challenged old assumptions and dramatically altered the picture. Now planners in communities across the country are increasingly hearing demands for: more housing close to tran- sit; walkable neighborhoods; and afford- able, low-maintenance, energy-efficient homes. In this chaotic time, how do citi- zen and professional planners determine what people really want or need, and what to plan for? It is essential that planners under- stand the market for housing in their community: what types (and price ranges) are needed, and in what loca- tions. Planners must also consider eco- nomic trends and other factors that could impact future demand. Today’s demographic and economic conditions, along with consumer prefer- ences, are converging to create a major shift in housing demand. Economic forecasts suggest that there will not be much action on homebuild- ing for about two years. Many communi- ties currently have excess housing stock that very likely will be filled before much new construction begins. So there is time to examine residential markets and how they are changing to avoid housing shortages, meet community needs, and revitalize neighborhoods adversely affected by current economic conditions. DEMOGRAPHIC TRENDS Two national trends are clear: (1) decreasing household size, and (2) an aging population. Once planners focused their housing plans on providing for cou- ples with children. Now these house- holds are a minority. As Arthur C. Nelson, Director of the Metropolitan Research Center at the University of Utah, recently noted: “Between 1950 and 2000, average house- hold size decreased from 3.38 to 2.59 [and] will continue to fall to about 2.46 persons by 2030 … Single-person house- holds will rival households with children and will be the fastest-growing market segment.”1 Moreover, as Nelson explains, “Baby boomers will turn 65 between 2011 and 2029.” impact on the demand for housing. After a major expansion in the supply and demand for owner-occupied housing, bankruptcies and mortgage foreclosures have left lot after lot of empty houses in suburban tracts. In some parts of the country, empty new residential towers can be found downtown and in the sub- urbs. In hard hit cities with high unem- ployment, whole neighborhoods have been abandoned, leaving existing hous- ing stock falling into disrepair. Moreover, new rental projects have stalled as access to financing has tightened up. Today’s economic conditions hold several implications for future housing demand. For one, in many places new construction will be put on hold while demand absorbs the existing supply. Much of the oversupply of housing lies in large lots in fringe locations. According to the American Institute of Architects, “These were the locations where large enough parcels of land could be assembled to generate the volume of construction required during the hous- ing boom earlier this decade. However, when the housing market weakened, large inventories of unsold homes remained on the market in these loca- tions.”3 These sites may be the last to fill up as builders and developers look else- where to meet demand. In addition, with home ownership out of reach for a growing number of people, the demand for rental apartments should increase – especially once employment improves enough so that people can move out of housing where they have doubled up with parents or friends during tough times. 1 Arthur C. Nelson, “Demographic Outlook,” Urban Land (Sept. 2009). 2 Richard M. Haughey, The Case for Multifamily Hous- ing, Second Edition (Urban Land Institute, 2003). 3 AIA Home Design Trends Survey (December 4, 2009). “IT IS ESSENTIAL THAT PLANNERS UNDERSTAND THE MARKET FOR HOUSING IN THEIR COMMUNITY.” Large homes in outlying locations may no longer be affordable or practical for retired people. According to a report published by the Urban Land Institute, “Some baby boomers will choose to downsize to an apartment or condomini- um after their children leave the ‘nest’... Multifamily housing allows seniors to remain in their neighborhoods through the different stages of their lives without the hassle of maintaining single-family housing.”2 ECONOMIC CONDITIONS In recent years the downturn in the economy has had the most far-reaching