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The Crisis in Housing WHO WILL OWN OUR HOMES IN 2000 AD? By THOMAS P. GALLAGHER/Senior Consultant, Washington, D.C. Partly obscured by the economic turmoil of today's recession, there are unmistakable signals of change being sent up within the housing industry. These changes will affect the industry more profoundly than short-term credit cycles and the fluctuations in housing starts which now command our attention. By the turn of the century, in fact, it is conceivable that we may see a situation something like this: • The free-standing single-family home, which once accounted for more than 90 percent of all new housing starts, will have been largely replaced by multiple-family dwellings consisting of five or more units. • A large and growing proportion of the nation's housing, both single-family and multifamily, will be owned by financial institutions, pension funds, government housing authorities, and special chartered corporations. • Rents in most metropolitan areas of the country will be controlled by a municipal or regional authority. • The mortgage will have virtually disappeared as an instrument of housing finance, because capital will be drawn away to finance energy production and other high return business activities. In the past four years, the Washington office of Touche Ross has conducted several studies of the nation's multifamily housing industry. The studies have identified several emergent problems which raise serious questions regarding the future of the nation's housing stock and of traditional ownership vehicles. Based on these studies, this article presents one possible course of industry development over the next 25 years. It is not the intention here to predict what this course will be. Rather, it is to speculate about who will own the housing we live in, assuming the housing industry develops in one of several possible ways, and to wonder, in a structured way, about the impact of that type of ownership on government. A Growing Trend The changes which are afoot in the housing industry may well affect both the physical characteristics of housing to be built in the next 25 years and the characteristics of those who will own such a housing stock. The changing characteristics of housing may be plainly read in the accompanying table, which traces housing starts from 1951 and compares single-family starts (buildings with 1-4 units) to multifamily starts (buildings with 5 units or more). As is apparent from the table, multifamily housing has risen from 5 percent of all starts between 1951 and 1955 to 45 percent of all starts in 1973. If projections of the Federal Energy Administration (FEA) prove accurate, in the light of energy needs, housing starts in the 1980s will be predominantly multifamily. As the FEA pointed out in its 1974 Blueprint for Project Independence: "The major effect of high oil prices is to intensify an emerging shift from single family homes to multiple dwellings and mobile homes, [in part because] new single family construction frequently must take place large distances from central city employment locations and, with high energy prices, the cost of transportation becomes important." Contributing to the shift toward multifamily construction are several other factors: Increasing housing costs—A house which cost $25,000 in 1968 cost almost $36,000 in 1974, an increase of approximately 45 percent in six years. A growing number of American families discover each year that home-ownership is an expense beyond their capability. Scarcities of developable land—As a result of the explosive growth of the suburbs since World War II, sending developers farther and farther from urban HOUSING STARTS ACTUAL AND PROJECTED 1951-1985 (In thousands of units—excludes mobile homes) 1951 - 1955 1956 - 1960 1961 - 1965 1966 - 1970 1971 1972 1973 Projected 1977 1985 Total Starts 7,427 6,539 7,258 6,759 2,052 2,379 2,057 1,790 1,690 Single Family 7,066 5,833 5,273 4,424 1,271 1,309 1,132 690 490 Multi- Family 361 706 1,985 2,335 781 1,070 925 1,100 1,200 Multi- Family 5% 11% 27% 35% 38% 45% 45% 61% 71% Production data for the period 1951-1973 is from the U.S. Department of Housing and Urban Development. Projections are based on data prepared by the Federal Energy Administration to evaluate the impact of a major effort to develop domestic fuel resources.
Who will own our homes in 2000 AD?
Gallagher, Thomas P.
Touche Ross. Washington, D. C. Office
Tempo, Vol. 21, no. 2 (1975), p. 09-11
|Source||Originally published by: Touche Ross, & Co.|
|Rights||Copyright and permission to republish held by: Deloitte|
|Format||PDF page image with corrected OCR scanned at 400 dpi|
|Collection||Deloitte Digital Collection|
|Digital Publisher||University of Mississippi Library. Accounting Collection|