Across the Pacific Northwest—Oregon, Washington, and British Columbia—only 37 percent of households consist of more than two people.

But fully 59 percent of Cascadia’s current housing stock has three or more bedrooms.

 

Sources: American Community Survey 2013-17; Canadian Census 2016.

Even in the city of Portland, it’s 49 percent of homes with three or more bedrooms despite only 34 percent of households with three or more people. In Seattle proper, the oversupply of big homes is 38 percent compared to 26 percent.

Is it bad that so many of us have bigger homes than we truly need? Well, maybe. The United Nations says it’s a significant contributor to climate change, for one thing.

The fact that one person has plenty of indoor space doesn’t in itself force another person to have less … unless we’ve passed laws that limit the construction of new indoor space. And of course we have many such laws. Bans on adding more apartments to places many people want to live are a primary cause of housing scarcity in the United States and Canada. Apartment bans are the single biggest thing preventing us from having a housing market that feels more like a grocery store than a cage match.

And in most cities, our zoning laws have indeed pitted us against each other. Every time a zoning law makes it harder for a household to find an attractive small or downsize option, it does a little bit of harm to everyone else. A small household ends up in a large home, and larger homes become a little bit more scarce.

In any case, this mismatch between home sizes and household sizes also explains a thing some people find troubling: Especially in the biggest cities, most newly built market-rate apartments are smaller than the homes that already exist.

Markets fail all the time, but this isn’t one of those times. Just the opposite: This is what it looks like when a housing market is allowed to respond to a demographic trend—in this case the trend toward smaller household size. Households of either one or two people account for an estimated 52 percent of metro Seattle’s net household growth since 2005, 59 percent of metro Portland’s and 69 percent of Greater Vancouver’s.

A lot of that is from people living longer. Some is from people having fewer kids and starting families later in life. Some of it is perfectly normal in any region where relatively plentiful jobs, vibrant downtowns and a beautiful environment have lured or retained many thousands of young adults.

If most existing homes are bigger than the typical household needs, of course most of the new homes built are going to be small.

This is exactly what markets are actually really good at: aggregating millions of private decisions by reasonably comfortable people—those who can afford to consider newly constructed buildings—about what’s right for their own households. Markets are good at this even when a lot of people find the truth surprising.

Collectively, the millions of homeseekers who together make up Cascadia’s housing market are helping the region fill this need by spending their money on smaller homes. That’s why small homes take only a few weeks to fill up, just about the same as big ones. In big cities, our market is trying to build more small homes at almost every chance it gets. Thank goodness.

Letting smaller homes exist is the key to keeping larger homes cheaper

The most expensive 2-bedroom in this Portland 12-plex, a few blocks from frequent bus and rail in Portland’s Hollywood neighborhood, is 5 percent cheaper than the single-detached 1909 home the building replaced. Photo by Michael Andersen, used with permission.

None of this is to deny a different, related problem: many households have more than two people, and do need relatively large homes. And large homes in the Pacific Northwest, like almost all homes in our otherwise prosperous region, are expensive.

In the case of newly built subsidized housing, prioritizing some large homes makes sense. Many families in need are eager for the chance to live with grandparents, siblings and so on. Under normal formulas, residents will pay more for those larger homes, even after subsidies. But for many people, the household community the larger homes enable is well worth it.

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    • Then there’s the more than 80 percent of low-income Cascadians who rely on market-rate housing.* What’s best for this subset of us? When poor people aren’t receiving subsidies but need larger homes, can we do anything to help the market provide them?

    It’s not going to be easy, because building things costs a lot of money and building bigger things costs even more. This is one reason it’s important to have some small homes mixed into every neighborhood: it gives people with less money the option to put their limited funds toward  a valuable location instead of a large home, if location is more important to them.

    But outside the realm of subsidized housing, there is one thing we can do to help poor people find larger market-rate homes for less money: We can make living space less scarce.

    There are two main ways to make that happen: allow more homes inside each building, and let buildings be larger.

    Sometimes this just means a renovation that turns an unfinished basement into an apartment, or replaces a garage with a cottage. Sometimes it means a whole new apartment building. Either way, we’re creating small homes that give middle- or even high-income singles and couples somewhere to live, allowing a cascade of voluntary relocations that will free up bedrooms in larger, shared homes that would otherwise be perfect for a larger family.

    This is the same process of new homes opening up existing homes that Evan Mast of the Upjohn Institute for Employment Research described at the city level in a paper published in July. In a separate paper published in October, Xiaodi Li of New York University found that newly constructed apartment buildings tend to reduce upward pressure on rents in nearby buildings even within 500 feet.

    And here’s one thing that definitely won’t make bigger homes cheaper: forbidding new homes from being small, as recently proposed in Des Moines, or (phrased a different way) requiring them to be big, as recently approved in Seattle. That’s a good way to prevent small homes from existing, but it can’t make the market build big ones, because there’s no magic that’ll make more of us able to afford them.

    Some people don’t want small homes, and they shouldn’t be forced to live in them. But anyone who does want to prioritize their preferred location over a big home should have that option. It’s an option that fits more Pacific Northwest households every year.

    * This is a conservative estimate based on 2012-2016 Department of Housing and Urban Development data for Oregon and Washington, the 2016 Canadian Census, and this report on Washington’s MFTE program. Adding all households in these subsidized rentals together, and assuming that all US households in subsidized housing are low-income, suggest that 13 percent of all low-income households are in regulated-affordable housing. I considered a US household “low-income” if its income was less than half the median calculated for its area, and I considered British Columbian households low-income if they had incomes below $20,000 Canadian, or below $30,000 for households larger than one.