Why Americans Like Big Homes
Americans generally see bigger as better, and a desire for status combined with local government's desire to attract high-income residents often drives the development of large homes on large lots.
The average new American home is now 2400 square feet. Smart Growth advocates say we're buying big houses on big lawns and making the problem of urban sprawl worse.
To discuss this issue, Great Lakes Radio Consortium Senior Editor/Correspondent Lester Graham talks with Chris Micci, a land development manager for a residential homebuilder, and a former lobbyist for the Real Estate Building Industry Coalition in Charlotte, North Carolina.
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Big houses
Chris Micci is certainly correct in asserting that a lot of Americans tie their self-image to their houses. It's something that's been going on for centuries, probably millennia, in human cultures. Beyond that, however, his comments are basically self-serving apologia for realtors and builders who, just as auto makers advertise SUVs because their profit margin is far larger than economy models, stand to make far more money from larger-than-necessary homes with ubiquitous "luxury" features than they do from smaller, more environmentally-friendly structures. His distaste for inclusionary zoning policies is understandable, but not in the public interest.
There hasn't been a "free market" in real estate in the United States since the first English colonists landed in the 17th century, which is to say — ever. From the British government's largely futile efforts to keep the colonists on the east coast to the Land Ordinance of 1785, through the Homestead Act, to current zoning ordinances, government policy and action, whether national, state or local, has always influenced land values and settlement patterns. For the past half century, especially, low-density zoning ordinances adopted by local communities, and often supported by state statutes, have institutionalized the stereotypical suburban, auto-centric development pattern, and in the process promulgated the most egregious forms of economic bigotry and segregation.
Big Homes
It couldn't be that people just prefer larger homes (or cars) when their finances allow them to purchase them?
And of course it couldn't be that builders and auto-makers are simply building the very things that the majority of people are demanding, within the confines of the rules set by government? (which is why their profit margins are higher for those products... more demand and sales above set fixed costs)
No, of course not.... consumers have absolutely nothing to do with the equation...it's just greedy businessmen driving the whole schebang.... darn those evil builders and auto makers.
Preferences.
I'd say it could be also that Madison Avenue sells you a line that bigger houses and cars are better and then they could scream to the gummint that CAFE standards would mean hiring a new marketing agency & hurt the agency's profits.
And it could be the fact that your daddy gives you "wisdom" saying to buy the biggest house you can afford (because it could be that real estate is the major investment the shrinking-wage middle class can afford).
Or it could be that society prefers to judge households by having a house bigger than they need thus households feel compelled to choose to go along to be accepted.
Or it could be that everyone isn't rational utility maximizing agents all the time and thus they make purchases that can't be rationalized.
Best,
D
Exactly Right
All those are perfect examples of consumer preferences... whatever the reason behind them. To blame the building industry (or most businesses at all) as being at fault for producing what people want (for whatever reason they want it) is simply naive at best, and exhibits a faulty understanding of how businesses operate (expecially the the real estate development industry).
Plus, the ulitmate arbitrater of what gets done is the government, every single house or car that gets built is manufactured within the confines of what the government says a business can and cannot do (zoning, CAFE standards, whatever). In CA, in many muncipalities, it is financially impossible to build non-luxury homes as government regulations (in many cases well-intentioned) have driven up the costs of building so much that the only way to turn a profit is to build for the upper end.... so to blame the developer is about as stupid as stupid gets as they're just reacting to the confines which have been set. It's like blaming the local service station operator for the high price of oil.... it's nonsensical.
Which one is it Consumers or Government?
Hey Ricardo,
You just flipped from saying the consumer demands what the consumer wants to saying that its all the government's fault for squeezing the builders. So uh which one is it?
I agree with your point that its not an all or nothing game. But I don't remember the last time I was at city hall meeting where local residents were demanding more luxury homes in their market. But I have heard of quite a few where developers where arguing for density transfers and promising to build more crappy stucco apartment bldgs near the freeway in order to be allowed to build bigger lots near the foothills. It also seems that when city's do push back and demand more density or more affordable housing developers and builder's still seem to want to develop. And they never seem to cry on the way to the bank afterwards.
Also you threw out the naive charge, but I've never heard of the luxury home buyer's lobby, but I have heard of the builder's lobby. "Follow the money" and see who's naive about the way things work in California.
Both
Consumer's demand the the best home available given their income range (whatever the "best" home means to that particular person). Builder's respond just like any other business, they try and produce whatever the consumer wants... more SF, more amenities, whatever sells (and they have to produce it a price range that 1) can sell, and 2) covers the cost of production (including brofit)).
However, this market (like all markets, even "free" ones) has rules set by the government that skew the outcomes...(whether the rules are good overall or bad overall is moot, it depends on your values)). The current rules the government has laid down in places like CA, NJ, basically force builders to only serve the upper-end of the market... as they have made it financially impossible to build moderately priced, moderate amenity homes that middle class folks can afford. Hence the lack of buildings for those consumers in the middle and low end...in essence their demand cannot be served. And make no mistake, the demand is there (hence the calls for "affordable housing" and the current demographic trends of folks in the middle concludin their "best" house is a bigger, cheaper house father out). Unfortunately, the way the rules are set up, middle and low end demand cannot be met.
So... it's both. And yes, all developer's are greedy. I have never doubted that for a minute. The problem in blaming them lies in the fact that they are only a prism through which the underlying consumer demand manifests itself, the other prism being the rules the government lays down...as demand can only be met while playing by those rules (hence developers trying to game the rules in their favor as they know the demand for their project exisits). You'd be right on the money if nobody bought any of the projects that got built...but they all get sold (eventually, current downcycle included). Is trying to game the rules in their favor a bit undecent, maybe, but that's basically what every orginization out there is trying to do (Sierra Club, Neighborhood Associations...etc.).
agree
I agree Ricardo. I have argued with folks about this ad nauseum with little success. One ironic thing is that Bob Toll says that land use regulation has created an oligopoly in the marketplace that would be illegal to create had he tried to do it on his own. It actually helps him and he opposes it because he realizes its unfair. What he is speaking about is how all the expensive hoops they have to jump through just make housing more expensive and squeeze the little guy. Therefore, the big production builders with deep pockets and legal teams win out and the guy who can't carry the dirt forever gets burned. And the worst part about the whole thing is that after all those regulations and city hall battles, something always gets built somewhere and its almost guaranteed to be sprawl like thanks to most cities zoning codes. So, we end up with developments which conform to code and stink and are super expensive since, in some places, it's $200,000/unit before you break ground.
So, I invite those espousing economics to cite externalities to turn to the next chapter about inefficiencies created by policy, sometimes called deadweight losses to society. The housing market does have some negative externalities, however, most all the land use policy does not counteract the consequences of housing production. It simply stalls time and adds legal costs borne by consumers also identified by economists as a dead weight loss to society.
Ironically, it's government intervention again, as many have pointed out, that is at least partly responsible for bigger houses. But, depending on your baseline (larger than what?) some of it is market driven. The difference between an 800 sf and 1,700 sf for example is probably a market one. When you get up to average suburban homes getting up to 2,500 sf, a lot of that is fiscal zoning, builders making up for costly regs by trying to sell for more $$, status (which one could argue is the market). I don't believe that automobility or lack thereof affects housing size. There are plenty of city condos/lofts that are quite large, though smaller on average. I think it has more to do with previously mentioned factors.
Exact choice.
I wouldn't call them 'preferences'. Nor would I call them ‘choices’.
As was detailed above by photoguy, the citizenry wanting politicians to enact large-lot zoning so rational maximizing agents have a range of choices between Suburb A and Suburb A, each with the same trim package, color palette, same 3 elevations (6 if flipped) and the same 4 shrub species isn’t really allowing a market choice.
And the builders in these here parts (and many other parts) don’t like to deviate from their successful model that the BIA, NAR, and turfgrass lobby has laid out for them, and the Bank knows how to loan money for.
What is revelatory about real, actual choice and preference, however, is when rational maximizing agents (esp. educated ones) are surveyed about what they’d choose, many, many agents would not choose Suburb A but instead a development with TND or NU attributes if they could find one on the market that a builder isn’t scared to build, the Bank isn’t scared to lend money for, and the neighbors aren’t scared that the smaller lots will decrease their property values. And, depending upon race, if their family and social network is nearby. Proximity to work helps too. Anyway,
But here I am arguing against the ‘Free Market chooses’ non-sequitur, when I should be pointing out that photoguy teases out the implicit reasons behind the big house phenomenon quite well: status, zoning, autocentrism, marketing, government intervention.
Best,
D