What types of housing does Rochester need for millennials looking to buy?
Let’s talk young people and housing.
We like to be close to the action. We like the ability to relocate. Even the thought of a 30-year mortgage scares us.
So what do we do? We rent.
This is a nation-wide phenomenon really, but due to this sudden influx of young workers with Rochester’s limited existing housing stock we present a unique case study. This is evident with nearly 5,000 apartments currently planned, under construction, or leasing in Rochester.
With that being said, we do need to look towards the future. As the current influx of millennials becomes older and starts families, rentals no longer are ideal. We want equity, freedom from landlords, green space, areas for the kids (or to get away from the kids), etc. So where do we move? The short answer is we can’t. There isn’t inventory available.
Home prices have also increased drastically: 28 percent over the past five years. Nearly 10 percent the last year alone. More like a 50-60 percent for lower income housing since the mid-2000s. Median prices are up $50,000 over the last seven years.
Why has this happened?
Costs have skyrocketed. The price escalators of regulation and labor is unprecedented. Regulation imposed by government at every level is now approaching $100,000 in costs on a median priced new home in Rochester. From 2011-2016, this number nationally has jumped 29.8 percent while disposable income has only increased 14.4 percent. Regulation is increasing more than twice as fast as an American’s capability to pay for it.
So what about condos?
As much as this author would love to see condos take hold, we again have priced out this demographic due to the well-intentioned 10 year liability exposure rule. This warranty has been broadened to cover nearly every aspect of the home, involving not only developers but subcontractors, design teams, and basically anyone else involved in construction. The result is no comps and limited financing. Too risky.
So now we're stuck living in long-term zero equity gaining rentals. Paying monthly rent while saving for a down payment. Sounds counterproductive, doesn’t it?
It’s time to be innovative with new product designs that cut down the costs of new homes. How about a community-wide initiative to create the ideal product at a feasible price point?
Community members determining what type of product they would buy and for how much. Businesses determining what type of product is sustainable and profitable. Nonprofits and philanthropy helping with risk mitigation. The city loosening land use restrictions and allowing for expedited processes. This product could then be prototyped through an incentive based private/public partnership.
The design could potentially involve smaller lots and less square footage with the upgraded amenities a younger generation expects in a new home. This type of program could create the entry-level type of home that the millennial demographic has been looking for at a reasonable price.
However, there is a risk factor and a community wide buy-in will be essential for this type of program to be successful. Builders have solely attempted this type of development in Rochester before only to get tied up in years of bureaucracy and suffer major losses.
If completed successfully, the result would be a community driven, new generation home exhibition that opens the eyes of businesses and buyers alike to a new cost-effective line of essential life products.
The reasoning of this article is to start the conversation and see if there is public interest for such an initiative. What are your thoughts?
Keith Cousins is the public affairs director for Rochester Area Builders.
Cover graphic: Licensed / Canva