Conventional wisdom says there’s a simple way to kick-start the economy: build more. Housing starts—the number of homes begun in a given period—is a leading index of fiscal health, and now the National Association of Home Builders (NAHB) is calling for a federally funded plan to revive residential building. “[T]o successfully pull our nation out of recession,” NAHB president Jerry Howard said in December, “we must address housing first.”Because new construction tends to take over suburban greenfield sites, growth often exacerbates sprawl, increases emissions, and destroys habitats. In other words, standard economic principles actually encourage overdevelopment and environmental damage. A better measure of ecological health would be the number of housing stops, since slower growth is an environmental upturn.
Independently of the environment, more housing isn’t needed now. According to the U.S. Census Bureau, annually the number of homes built “on spec”—without a homeowner already lined up—is up to five times the number built to suit, so supply increasingly outpaces demand. Today, an estimated 1.3 million units remain vacant, many of them in suburb-heavy cities like Phoenix, Atlanta, and Dallas, where new real estate spurs new freeways, infrastructure, and retail strips.
In The New York Times last October, Harvard economist Edward Glaeser estimated that even if construction halted altogether, the number of households wouldn’t catch up to the number of houses for two or three years. Unless the pace slows drastically, this imbalance will continue. Virginia Tech’s Metropolitan Institute forecasts a surplus of nearly 25 million homes over the next couple of decades. “The sharper the decline now,” Glaeser writes, “the faster the construction downturn will be over.”
So should builders just hang up their hard hats? No, but the current slowdown should challenge the industry to rethink how and where to build. The fastest-growing communities have been bloating for years, but designers, builders, planners, and policymakers can help trim the fat by limiting growth and increasing density.
New development can revitalize inner cities by reclaiming neglected neighborhoods and restoring older housing stock. More-compact communities promote health, encourage socializing, preserve habitats, curtail energy consumption, and conserve resources. New York City’s density and shared infrastructure make it the most resource-efficient city in the country. Such benefits have led the states of Oregon, Washington, and Tennessee to require cities to adopt urban growth boundaries to curb expansion—like cinching up a city’s belt.
Economically, environmentally, and socially, we don’t need more houses right now. We need smarter development.