Month: May 2021

Econ 101 - A Shortage of Supply

Econ 101 – A Shortage of Supply

  • There is a severe lumber and other building materials supply shortage in the US that has been ongoing for the last year.
  • This was caused by the increased demand during COVID for home repairs as well as a drastic decrease in supply when production was shut down.
  • As a result, lumber and other materials prices have skyrocketed. This, obviously, increases the cost of building.

I recently tried to make some additions to my deck at my house and ran into a problem – I can’t get a contractor to actually give me a bid. I realize that, in the grand scheme of city wide improvements, this is not a big issue – except to me. But it also made me wonder why this was so difficult. What is going on?

I figured at least part of the reason was what I had been hearing a lot lately – there is a shortage of building supplies that has increased costs. But I wanted to know more and see how that is affecting the housing market. So this week, we are going to look a little into what is going on with building supplies and what the future may bring.

Is there a Supply Shortage?

The threshold question is simple – is there actually a building supplies shortage? From everything I have read and heard – the answer is yes.

Perhaps the most obvious and talked about is a lumber shortage. According to most reports, there has been a drastic shortage of lumber since mid-2020. And, as a result, it is much more difficult and costly to get anything built.

Beyond lumber, there has been an extreme shortage of other building supplies as well – such as steel, electrical, and lighting supplies. The shortage started last year and has continued through to this day. And its not totally clear to me how and when it will fully catch up.

Reason for the Shortage

I reckon you can guess what the reason for the shortage is. The same thing that has influenced everything for the past year – the pandemic.

At the start of the pandemic, production and operations for so many industries just stopped. As a result, we had little to no production of lumber, steel, electrical supplies, etc. for weeks. And then when the production restarted, it had a lot of catching up to do.

But another interesting thing happened during the pandemic – the demand for lumber (and other building materials) skyrocketed. People were stuck at home so they decided to work on those long put off home improvement projects. And with interest rates at all-time lows, they could refinance the house and use some of that money for the projects.

Effect of the Shortage

So while the building materials supply has decreased dramatically, the demand for the materials has increased. Indeed, in addition to home improvement projects, many cities across the country have a severe housing shortage. There is great demand for all kinds of housing – including affordable housing. As a result, when fall rolled around, new housing starts increased which led to an even greater demand for supplies.

Anyone who took Econ 101 in college knows, therefore, that when you have demand for building materials but little supply of them – the price is going to shoot up. And that is exactly what has happened in the past year.

And because of this drastic increase, the cost of construction has gone up dramatically. Builders are very worried that they may reach a point where consumers will not be able to or interested in purchasing or renting at the costs that the increased construction demands. That could, theoretically, lead to an even greater decrease in housing availability.

So when will the cost of building materials come back down? Will supply catch up? At least one analyst has opined that, as vaccines become more prevalent this year, lumber mills will ramp up production and increase supply. But that may take well into 2022 or even 2023 before that happens. Until then, high prices may be here to stay.

The Time is Now

The Time is Now

  • The deadline to file your property tax protest is Monday, May 17.
  • When you file, make sure you file for both incorrect market value and unequal compared with other properties.
  • Once you file, you will have your informal and formal hearings. Make sure you are prepared for both.

Hi everyone. I hope you are having a great week. This week’s blog article will be short and sweet – MAKE SURE YOU FILE YOUR PROPERTY TAX PROTEST. The deadline is within the next week. So this entry will just talk about what the deadline is, how to make protest, and what to expect once you do.

Filing the Protest

As I wrote above, this is the week. In Texas, normally property tax protest forms are due on May 15. But this year, May 15 is a Saturday. As a result, the deadline to file your protest is moved to Monday, May 17. So before next Monday, you must send in your Notice of Protest to the appraisal district for the county in which your property is located.

When you file the Notice of Protest, its very important to file – at the least – the following reasons for protest in Section 3 of the form:

Incorrect appraised (market) value, and
Value is unequal compared with other properties.

We have discussed in previous blog articles the importance of protesting both of these. They are both vital to making sure your assessed value is lowered to the appropriate amount.

What Happens Next

Once you file the protest, you will likely hear from the appraisal district with a time for your informal and formal hearings. IMPORTANT – The appraisal district may not contact you directly. You should be proactive to check when your hearing dates are because it is very important that you do not miss the dates. You may not be able to make them up if you do.

At the informal hearing, you will talk with the county appraiser to see if you can reach an agreement on what the appraised value of your property should be. The appraiser will show you the data he or she has and ask for your information. Be prepared with your own data and analysis to argue your position.

If you cannot agree on an appraised value, you will then proceed to a formal hearing. In some counties, this can occur immediately after the informal hearing. At this hearing, you will present your evidence to a three person panel – as will the appraisal district. The panel will then decide what the appraised value of your property should be.

The final step after that, if you so choose, is to file a lawsuit against the district. You then proceed to litigation against the district.

But none of this can start unless you file your Notice of Protest by May 17. So please make sure you do not miss that date. If there is anything we can help with, please do not hesitate to call at 512-614-0335.

Thank you.

How will Austin Solve its Housing Problem

Density can help the Housing Shortage

  • The United States appears to have a housing shortage crisis. Especially when it comes to affordable housing.
  • A major cause of this is the history of exclusionary zoning – including single family housing restrictions.
  • Its time for cities to allow significant upzoning to increase their density and get rid of single family zoning.

As I was looking around the internet to find inspiration for this week’s blog post, I kept seeing similar articles in local websites – residential housing prices are increasing rapidly. To nobody’s surprise, the reason for this rapid increase is a lack of housing in general. In many cities, supply of residential housing is extremely low. And this, of course, increases the cost of that housing.

What has caused this seemingly nationwide shortage of housing? And can anything be done to help solve the problem? That’s what we are going to discuss this week in the blog entry.

One thing before I start – there is only so much time in a day and this is a very complicated issue. So I’m going to cover a few of the big issues surrounding this topic. But it is certainly not an exhaustive recitation of the situation. For that, there are probably books on the topic. If interested, support your local bookstore and search one out.

Does the US have a Housing Crisis?

As I wrote above, it sure seems like there is a housing shortage across our country. When browsing the internet this week, it was easy to find articles detailing this issue. From Austin to Dallas to nationwide – it seems like many cities are having housing shortage issues.

This is, undoubtedly, a complicated issue. And I’m sure that some people would argue there is no shortage or, if there is, that it is not a crisis. But for our blog purposes, we are deferring to the numerous articles that have been written throughout the country. And it sure seems like it’s a common theme in many cities that lack of housing supply is a big issue.

What Caused this Shortage and How do we Fix It?

There are many factors that go into a housing shortage. And to truly examine all of them would take a space a lot bigger than this nominally commercial real estate blog. But I do want to talk about one of them – and that’s exclusionary zoning.

As you most likely know, many cities were set up with racist zoning areas. For example, the City of Austin specifically set up an area in East Austin to try to funnel black Americans to live there. In addition, many neighborhoods had racist deed restrictions, which would not allow black Americans to live in the neighborhood.

Thankfully, court rulings and civil rights legislation has done away with these explicitly racist zoning and deed restrictions. But a way around that for many neighborhoods was to set up single family home restrictions that required large lots. This set an income floor for neighborhoods which, when these were initially instituted, were very often used to exclude black Americans.

Need More Density

Unfortunately, unlike the explicitly racist rules, single family residential is still very prevalent in our cities. Neighborhood groups continue to use their power to protect this zoning. To be clear – while this has a racist history, I am explicitly NOT accusing neighborhood groups of protecting single family zoning for racist purposes. It is likely done to preserve the neighborhood that they currently have.

The problem with that is – we need more housing. And the best way to do that is to increase the density of an area. We need to build more townhomes, apartments, condos – this is the way to get more housing in a smaller area. Increasing density can decrease commute times, make areas more walkable and livable, and help the environment.

Unfortunately, cities have been too slow to adapt upzoning and allow more density. City Councils continue to allow low density zoning in the highest population areas.* And, as a result, they are significantly contributing to the housing crisis that exists throughout the country. The time has come, however, for city councils to change their tune and end single family zoning.

*Austin residents may recall that we tried to pass some new zoning with Code Next – but after stalling for years at City Council, it was finally shot down by the courts after challenges from local residents.