Fascinating piece by Conor Sen at Bloomberg on why a shrinking population might sound like the answer to housing affordability, but in realty it is only going to make things worse…(Bloomberg)
- How a shrinking population makes thing worse. A shrinking population will actually make homes more unaffordable in major metros. Why? Well, as Sen notes, “People tend not to want to live in shrinking places, and if the U.S. population starts to decline, it might lead to even less housing demand in stagnant metro areas, and an even worse housing affordability crisis in the smaller number of places that continue to attract new residents.”
- A shrinking population will make home building even more constrained. As Sen notes, “a country without any population growth doesn’t need to have a growing housing construction industry.” And if you can’t grow profits via greater sales volumes, you try to do it via reduced competition and cost cuts. Sen points out this means consolidation, “That will lead to consolidation among homebuilders and the building materials supply chain.”
A shrinking population sounds like a good thing for a country with a housing inventory problem, but reality tells a different story. A shrinking population will actually make small towns smaller (if not kill them entirely) and make big cities even bigger and more crowded.