Housing Starts and Sustainability


For decades I’ve heard the media using “housing starts” as a key indicator of economic activity and the state of the economy, and it has always concerned me.  It just seems intuitive that we can’t keep starting new housing forever, and it smacks of a growth-oriented mindset that doesn’t make a whole lot of sense given what we know today.  In fact, doesn’t it seem intuitive that sustainability will mean low, stable numbers of housing starts?

Construction eats a lot of energy and natural resources in general, and, in the interest of sustainability, I expect the emphasis of the construction industry to shift from more new buildings on new land to renovation and replacement of existing structures.  I can understand replacing obsolete, run-down, and inefficient buildings, but concentrating on building sprawling new upscale developments doesn’t seem like especially sustainable behavior.  I realize it is attractive as an opportunity for short term profits, but, in hindsight, it appears to be a significant factor behind the US recession in 2008.  

I don’t think the players in the industry post-2000 recognized the true size of the market, and too many of them tried to squeeze into the most profitable market segment just as the technology bubble burst and the economy throttled back.  The resulting overbuilt condition is frequently cited as a part of our woes in 2008.  This, combined with the overselling and downright fraud allowed in the mortgage industry during the real estate boom (driven in part by the prosperity of the technology boom), did as much or more than anything else to create the current economic slump.  Now the media is discouraging the public further with reports on low numbers of housing starts, painting them as gloomy and further dampening the economy.

In a sustainable future I imagine housing starts will remain at a very low number, however, and the big construction companies to be no longer building subdivisions at all.  Given this, I expect (hope) housing starts will never again reach the heights produced by the recent real estate boom.  Instead, over the long term, I foresee a shift to renovation and replacement of existing but obsolete structures as opposed to new construction.   I recognize this may not be visible in the near term, as economic fluctuations could easily create another real estate boom and housing bubble, but within the next two to four decades the numbers should settle to a sustainable level. 

Such a shift suggests a lower level of total revenue in the industry, but that seems intuitive for a sustainable economy — growth can not be a hallmark of economic success and prosperity except in the case of measures such as market share growth or productivity growth.  There is no question, however, but we will all have to get used to doing more with less, including in our housing.  I fear the more we boom in the next couple of decades, the harder we will bust.  Therefore, it is everyone’s responsibility to control the boom and ease the bust.

I welcome your constructive comments, and always appreciate being “wised up.”

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One response to “Housing Starts and Sustainability

  1. Yes, we should be alarmed by constant talk of “housing starts,” which translates into more people living on a shrinking supply of land. It’s the same old endless-frontiers lie. Construction stats are grim news if you value open space and wilderness. All people talk about is “creating jobs,” as if physical resources are irrelevant.

    They should clarify whether housing starts refer only to new ground broken, or the replacement of older homes, which isn’t as consumptive.

    Housing starts are really a leading indicator of mindless population growth (3 million per year in the U.S.) and the presumption that the economy can grow forever to sustain those numbers.

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