Housing: Start Small

Complaining about housing prices is a pastime that is matched by a quiet self satisfaction among those who were fortunate enough to have bought at the right time to ride the real estate roller coaster to unplanned wealth. What today’s first time buyers often fail to appreciate is that many of today’s housing winners started out small.

It would have been very common for GI’s returnng after the Second World War to rent a small apartment or live in a tiny house while they were starting a family. The classic FHA homes designed in the 1930’s often contained less than 1,000 square feet. Land was inexpensive and widely available and prices of labor and materials were within the reach of average households. Fast forward a few generations and the housing situation has gotten much more complicated…and expensive. We humans aren’t twice as big. We don’t need twice as much “stuff” as our ancestors. But somehow, the average new house is twice as big as it used to be.

I searched the MLS for Sonoma County today and found three active listings for homes under 1,500 square feet that were built after 2010. The same search for modern homes over 1,500 square feet had 65 results. That 20 to 1 ratio isn’t a mistake or aberration. It’s just what is getting built. It’s nobody’s fault, really. Buildable lots are hard to come by and expensive when you can find them. Development fees for new construction are often more costly than already expensive building permit fees. Together, those fees can surpass $100,000 making it impossible for builders to offer low priced homes.

The housing stock that remains from the days of smaller homes is in high demand since it is the only remaining “naturally affordable” housing. The only housing getting built today that is comparable to the FHA plans I mentioned earlier are the ADUs that are being added in backyards, created in garages, and carved out of spare bedrooms in existing homes. The combination of no new lot costs, limited development fees, and modest building permit fees allows these small homes to fill the need created by decades of failure to build enough new housing for a growing population.

Embrace the idea of small homes. It’s the fastest, most economical path to solving the joint housing problems of affordability and homelessness.