A single solution will not solve the affordable housing issue. This Forbes article offers a trifecta that could work together to offer a strong solution to a long term problem.
Numerous factors have contributed to America’s affordable housing crisis. On the West Coast, tech companies have generated such unprecedented wealth that entire communities have become gentrified and unaffordable. Nationally, the Fed has kept interest rates at historic lows for nearly a decade. These two forces have created a perfect storm: a crisis of unaffordable housing in urban America.
A recent McKinsey report concluded that California must build 3.5 million more homes by the year 2025 — which translates to 350,000 units per year in each of the next seven years. Given current zoning laws, land scarcity in urban areas and the myriad of factors making that a seemingly insurmountable task, it’s time we embrace innovation and look toward some new ideas.
Here are the three areas where private sector innovation could make a meaningful impact on solving this housing crisis.
1. Construction
The way we build has not radically changed over the past 100 years. Wood and steel are our primary building materials, and human labor puts it together. The average cost per square foot of new residential construction is typically estimated to be around $150. So, if you didn’t have to pay for land, and you built a 2,000-square-foot home, it would still cost $300,000.
Shelter is among the most fundamental of human needs. For thousands of years we have had to build shelters for ourselves, and now, in the 21st century, we have reached the point in which we can’t even do so for under a quarter of a million dollars.
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