While various housing commentators have wanted to call the top of the market for Philly's post-recession housing boom for a couple years now, this chart created by our friend Jake Liefer should pour cold water on that notion.
What you're looking at is a comparison of homes listed for sale since 2001, and the absorption rate for those homes.
And what you see is that 'for sale' inventory is at a 16-year low. What's more, the rental vacancy rate continues to be stuck at an impossibly low 3%, despite the perception that we're experiencing lots of new construction. While it may be true that there's a lot of construction happening, that doesn't mean there's enough to meet the demand from all the people who want to live here. This matters because if we don't build enough, home prices are going to get out of control like in many of our peer cities on the East Coast.
One caviat to this chart: the number of available units is based on building permit data from the Census, which only takes into account newly constructed homes. Rowhome rehabs have been an important part of the housing economy in recent years, so the charge could be low-balling the available supply.
Still, the fundamentals show a healthy market that is continuing to gobble up housing supply as fast as (or possibly faster than) home builders can manufacture new units.
So why would a big gap open up between supply and demand like this? There's a supply side issue. Some combination of zoning restrictions, labor costs, materials costs, and likely a combination of all three. We've been reading the news about climbing labor costs as the growing number of construction projects has stretched the local construction workforce thin. But a big part of the issue is that we still just aren't zoning to accommodate the kind of growth we've been experiencing.
Philadelphia already has a larger population and more jobs in 2016 than the City Planning Commission forecasted in the 2035 plan, which forms the basis for recent efforts to rezone neighborhoods. As such, it's time for the Kenney administration to zone for more growth, and particularly the sort of mid-rise, mixed-use housing that can scale to meet demand.
While it may seem to many residents that the whole city is a construction site right now, much of this construction is for one-off single-family projects that will ultimately provide shelter for just one household. But as the city's homeownership rate continues to decline, and more young adults and empty nesters seek more flexible urban housing choices close to amenities, there is a need to rezone more of the city's land for the type of mid-rise multi-unit buildings that can start closing the gap between available inventory and unmet demand.
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