Concerns by some homeowners that building new homes in their areas may reduce the value of their properties is one of the biggest obstacles in expanding access to potentially affordable homes, a developer told Newsweek.
Bradley Rohrs, president of The Rohrs Team that operates in the Washington, D.C.-Baltimore area and has also worked in West Africa, said in an interview that homeowners in areas that developers are looking to expand worry that new construction could affect the value of their homes, causing resistance to the building efforts.
“They’re operating in their best interests,” he said. “But when we develop properties or we’ve worked with developers and syndications and partnerships, the biggest resistance that we have to increasing the housing supply in any given area is concerns that the construction of new property could lead to a reduction in home values.”
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This pushback from current homeowners can limit the ability to increase access to affordable housing, he added.
“The reason I say that they are greedy is that they support both directly and indirectly policies that restrict the amount of housing which directly benefits them in terms of increased equity at the expense of affordable housing, particularly for the next generation and poor people who are of lower incomes,” he told Newsweek.
Rohr also added part of the reason homeowners are so protective of their home values is that it is deeply connected to their personal wealth, adding an element of complexity to the issue.
A significant chunk of Americans has their personal wealth tied to the equity on their properties, which over the last few years has soared as home prices have gone up. Bankrate points out in 2019 the median price of a home was $258,000. By 2023, that number has spiked all the way to $335,000. Research, meanwhile, shows that home equity is one the most important aspects of wealth in America. In 2021, the median net worth of U.S. households was about $167,000. Excluding home equity from that equation would bring that number down to about $58,000, according to the Pew Research Center.
Rohrs said that supply continues to be a challenge in increasing access to affordable home. The so-called lock-in-effect, where homeowners are reluctant to give low mortgages at a time when the cost of a home loan is at 7 percent, is also limiting supply and leading to higher prices.
“What we have seen almost anecdotally is that in the D.C. metro area, there is a huge uptick in the number of people who are landlords simply because they don’t want to lose their low interest rate and resistance to people upgrading,” Rorhs said.
High mortgage rates and elevated prices are proving a challenge for buyers, particularly first-time prospective owners.
“Desire to purchase houses has not changed, but there has been a little bit of a chilling effect on first time homebuyers, where it’s seen as something where purchasing s home is seen as something that is an insurmountable challenge,” Rorhs said.
More construction would solve the issue of the lock-in effect and expand access to homes for low-income Americans, he said.
The issue is still always going to be supply,” Rorhs told Newsweek. “If we were just building houses, this would be an absolutely nothing.”
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.