Vacant lots in desirable urban neighborhoods will run out soon, says Issi Romem, chief economist at BuildZoom, a lead-generation company for building contractors. In some of the nation's priciest cities, such as New York, new construction tends to be concentrated in downtown clusters where zoning rules allow high-density construction, according to Romem's research on construction trends. Such cities stopped expanding outward, and builders are now left to find suitable lots within its existing boundaries. That, coupled with high land prices, reduces options for builders and prompts them to cater to the luxury market.
Traditionally, cities expand outward as they become more populous. Take Dallas as an example: New-home sales within a 30-mile radius of the city's center have fallen from 2000 to 2015. However, outside of that radius, new-home sales surged by more than 50 percent. Cities such as Phoenix, Atlanta, and San Antonio have seen similar trends.
Romem says that to spur more construction near urban cores, zoning rules need to be rewritten to allow for denser construction, particularly in neighborhoods that currently are limited to single-family homes. Otherwise, he says, it's unlikely that new housing will be built at affordable prices, and that will push out more city dwellers who can no longer afford to live there.
Source: “America’s Cities Are Running Out of Room,” Bloomberg (May 22, 2017)
