Selling Federal Land for Development Won't Fix the Housing Crisis. But This Idea Might Help
The National Association of Realtors® (NAR) reckons the United States is short 4 million homes to meet Americans' housing needs. And yet new construction remains "subdued."
Recently, legislators proposed selling millions of acres of federal land, some of which they believed could be used to boost housing inventories. Low inventories (too few homes for sale) mean a limited supply, which can't meet growing demand. And we all know that such a supply-and-demand model means higher prices.
Using federal land to build millions of homes for Americans superficially sounds like a great idea. But, unfortunately, it isn't, according to NAR.
Why? "The vast majority of federally managed land, especially that overseen by the Bureau of Land Management, is located in sparsely populated areas like Alaska and the West, where housing markets are not overwhelmed with demand," says the NAR.
Building 4 million homes might be possible. But there's no point in doing so in places no one wants to live because they're too remote and provide too few jobs.
"In short, while releasing federal land could offer incremental gains in housing supply in select Western metros, it is not a comprehensive solution to the national housing crisis," explains Realtor.com® senior economic research analyst Hannah Jones in the Federal Land Report. "Targeted reforms that address land use, zoning, and construction capacity in high-demand regions will be equally, if not more, essential to closing the housing gap," she concluded.
Single-Room Occupancy 'SRO' Units Might Help
"Low-cost micro-units, often called single-room occupancies, or SROs, were once a reliable form of housing for the United States’ poorest residents of, and newcomers to, New York, Chicago, San Francisco, and many other major U.S. cities," says a report last week published by Pew. "Well into the 20th century, SROs were the least expensive option on the housing market, providing a small room with a shared bathroom and sometimes a shared kitchen for a price that is unimaginable today — as little as $100 to $300 a month (in 2025 dollars)." A century ago, rent of $100 would have been between $5 and $6 monthly.
Nobody is suggesting that these were aspirational or desirable residences. They were the opposite. But they gave society's up-and-comers roofs over their heads for as little as $25 a week in today's money, after allowing for inflation.
Pew says that as recently as 1950, 10% of all rental units in some major cities were SROs. Homelessness had been rare between the end of the Great Depression and the 1970s, by which time SROs had all but disappeared.
So, what happened? Pew explains:
" ... beginning in the mid-1950s, as some politicians and vocal members of the public turned against SROs and the people who lived in them, major cities across the country revised zoning and building codes to force or encourage landlords to eliminate SRO units and to prohibit the development of new ones. Over the next several decades, governments and developers gradually demolished thousands of SROs or converted them to other uses, including boutique hotels for tourists."
Had SROs grown in number since the 1960s at the same rate as other types of homes, there would now be 2.5 million of them, calculates Pew. That's not the 4 million additional homes Americans need. But it's a big chunk.
SROs Could Ease Rent Prices For Standard Units
More SROs might bring huge benefits for the unhoused. But how would they affect the wider housing market?
Well, they might take some pressure off the lower end of the rental sector, perhaps reducing rents there. And that's likely to create a ripple effect in costlier rentals. Some, including a number of prospective homeowners, might choose to pay less rent so that they could keep more cash for investments or a down payment on a house.
True, ripple effects become weaker the farther from the initial impact they travel. So, we probably shouldn't expect a large change for owner-occupiers. But there could be some impact at the first-time-buyer end of the market.
The NRA's Jones proposed "land use, zoning, and construction capacity in high-demand regions" as among the more effective ways of solving the shortfall in housing units. Maybe building more SROs would prove a good place to start.
