Senator Mike Crapo last week hosted the secretary of Housing and Urban Development in Idaho and, at a round table including state and local officials, discussed a topic of big and obvious concern to many Idahoans: The high cost of housing, which also was the subject of a constituent survey Crapo conducted recently.
The survey was said to reflect (specific results were not disclosed) an evident high concern about housing affordability, and in the area of solutions HUD Secretary Scott Turner emphasized deregulation and tax incentives, evidently with the idea of building more houses.
The main round table event was behind closed doors, but it’s a fair bet that the larger drivers of high housing costs got little or no discussion.
To get an idea of what those are, you need to consider when the housing price crisis became a crisis: Not gradually over time, but rather in the course of just a few recent years.
You also have to consider that while the crisis is very bad for most people, it’s not a problem for all. If you want to buy a house priced at that median level of close to a half-million dollars or more, you either need to already own a house which you’re selling for about as much (California works for this), or you need major wealth, which could mean an income in six figures. Without one of those things, you’re probably out of luck when it comes to buying a house.That means only around a sixth of the population will qualify. And renting an apartment, as many people know, is no better.
That’s where the crisis is: Among the 75% or so of the less-wealthy people in the state (and beyond).
Classive economic supply and demand theory suggests that if you build enough houses, prices will drop as relative demand is sated. But in Idaho, as in many states - the housing cost problem is nationwide - strong amounts of home construction have failed to drive down prices, which have remained stubbornly high for the last half-decade.
Census estimates said that Idaho had 751,858 housing units in 2020, and by 2024 that rose to 832,675 - a major increase even considering Idaho’s growing population; from 2023 to 2024, in fact, Idaho’s housing stock was estimated to have grown faster than that of any other state.
There are about 740,000 households in Idaho, and in raw, overall numbers, there should be enough houses, apartments and other housing units to at least roughly balance supply and demand. .
And yet there aren’t. Zillow this year figures the average Idaho house value at $472,273 (in some high-demand places like Ada or Kootenai counties, it’s much higher), and that’s up over last year. The growth in cost has been spectacular: Zillow’s data says that as recently as 2018 that number was under $200,000.
You can easily see the truth of those numbers for yourself. Check out the house listings and see how many are available for, oh, $400,000 and up - and how many are out there suitable for the large number of people who can afford only something priced half as high.
So how can this happen in a free market, where a broad-based ability to pay should match up, at least loosely, with prices being charged? You sure couldn’t sell groceries that way.
One answer is that housing - houses mainly, but apartment complexes too - have become major investments in the past few years, especially in the last decade. Earners of average wages are competing with billionaires, hedge funds and other large-scale organizations, where residences are viewed as good places to park and invest money. And they’re willing to pay plenty, even much more than the house seems to be worth, because rising sales prices artificially boost rising prices all around - which means homeowners get more value, and investors gain as well, but houses are ever further out of reach for buyers.
Redfin News, a home sales tracking site, said last summer that investor home buying has risen notably in recent years, about 3% annually, and “investors bought 1 of every 6 U.S. homes that sold—purchasing $43 billion worth of properties—and 1 of every 4 low-priced homes that sold.”
Ever-ratcheting home prices serve their business model just fine, but ordinary homeowners cannot easily compete in a market where they’re so heavily outpriced.
That’s a far more pertinent factor in the rise of housing prices than changes in population, housing stock or regulations relating to it - since none of those things have changed so drastically in recent years.
When Congress and an administration, any administration, begin to cope with realities such as those, we’ll know they’re actually serious about home overpricing, and not just posturing.