In the 12 months ending July 31, permits were issued for 3,839 new homes in central Ohio, 11.3% below the previous 12 months, according to the real estate research firm Zonda Meyers.
“The common belief is we’re building apartments and homes like crazy, but the reality is we’re not,” said Jon Melchi, executive director of the Building Industry Association of Central Ohio.
“We’re not building anywhere near the number of homes we need,” he added. “This is something that is going to impact the future economic prospects of central Ohio if we don’t start tackling it now.”
The problem is long-standing. Home construction has failed to keep pace with central Ohio population and job growth for the past decade. In a study released in December, Columbus real estate research firm Vogt Strategic Insights concluded that central Ohio should be adding 14,000 to 21,000 new homes and apartments each year to accommodate demand.
Instead, the area has added about 8,000 a year, a figure now expected to drop below 7,000 in 2019.
The lack of new homes has helped push up prices for all homes. Columbus-area home prices have risen more than 4% a year since 2012, a pace that has accelerated above 6% the past two years and above 8% so far this year, according to Columbus Realtors.
“When supply drops or doesn’t meet demand, it just drives costs up for everyone,” said Bruce Luecke, president and chief executive of the affordable-housing agency Homeport. “The good news is we’re in growth mode and we have time to catch up, but unless we work harder to catch up, we’re not going to grow because there won’t be places for people to live.”
Builders say they aren’t building enough homes for several reasons, starting with the challenge of getting new communities and complexes approved.
“We’re running into a severe NIMBY (Not In My Backyard) problem that’s keeping homes from being built,” said Jim Lipnos, president of the housing development company Homewood Corp. “We should be building closer to 8,000 homes a year. The job growth is going to require it. If we want to bring jobs here, we’re going to have to bring housing, or at least double the starts we have now.”
Projects that are approved come with a multitude of conditions — density restrictions, water-and-sewer costs, road improvement requirements and material demands — that increase prices.
The median price of a new central Ohio single-family home in July was $338,793, up 75% from $193,000 in 2011, according to Zonda.
“In greater Columbus, it’s very, very difficult to get land-use approvals that allow for high-density development that in turn allows for more affordable products,” said Robert Schottenstein, M/I Homes president and chief executive officer.
Schottenstein said Columbus is the most difficult of the 15 cities in which M/I operates to build dense housing.
“There’s far more opportunity in other markets — Charlotte, Raleigh, Indianapolis — to develop sub-$300,000 homes that people can afford.”
Builders cite, in particular, zoning codes in many central Ohio municipalities that prohibit more than two homes per acre.
In addition, they say, the regulatory cost of developing subdivisions has jumped, along with material, labor and land costs.
One example, said Lipnos: Homewood recently paid $28,000 for a rezoning application in Jefferson Township that would have cost $500 to $2,000 a decade ago.
For apartment builders, neighborhood resistance is often more intense.
“What’s changed the most in the past 10 years is the entitlement process to get a project through zoning. Those sorts of things are becoming so much more contentious,” said Tre Giller, president and chief executive of Metro Development, which has developed about 10,000 central Ohio apartments over the past decade.
“It used to take 12 months to get rezoning. Now, it’s now 18 to 24 months, assuming you even get it,” he added. “There are some areas we simply don’t go to because we know we won’t be able to get through the process because there’s such a stigma on multifamily housing.”
Builders accuse municipalities of deliberately designing codes and zoning regulations to keep out the less affluent, a practice known as “exclusionary zoning.”
“Not many communities are turning down million-dollar housing developments, but they surely will turn down a project that would include normal density in other markets,” Melchi said.
And while central Ohio builders are getting lapped by those in boomtowns, they are keeping pace with regional peers. According to the U.S. Census Bureau, central Ohio has issued permits for 5,184 homes and apartments through August of this year. That’s far below Austin, Texas (21,426), Charlotte, N.C. (15,547), and Nashville, Tenn. (13,461), but in line with Indianapolis (6,623), Cincinnati (3,742) and Kansas City, Mo. (5,675).
One challenge Midwestern builders face is the price of existing homes. Despite big jumps in central Ohio home prices, they remain far less expensive than new homes, making it difficult for new-home builders to compete, especially with added regulatory costs.
“The Midwest has trailed the new home growth seen in other regions,” said Danielle Leach, the Midwest regional director and senior consultant for the housing research firm Meyers-Metrostudy. “This is largely due to the significant gap between median new home prices and median existing home prices.”
In central Ohio, for example, the median price of a new home in July was $339,000, compares with $187,000 for an existing home. That 81% gap dwarfs the 20% gap between new and existing home prices nationwide, Leach said.
“This is generally why you are seeing declining volumes in a situation where you have strong consumer demand,” she said.
The lack of new home construction isn’t just a problem for builders, said William Murdock, executive director of the Mid-Ohio Regional Planning Commission, a partner in a study now underway that seeks to address housing shortages in central Ohio.
“We are definitely concerned about this,” Murdock said. “If we’re competing with other regions and our housing costs are out of whack or we don’t have enough houses, that could affect our growth. … We need more homes.”
Tribune Content Agency