As the city puts affordable housing at the top of its agenda, the number of home builders in the Grand Rapids-area has fallen sharply since 2008.
The Home Builders Association of Greater Grand Rapids has 151 member companies which have residential builders licenses. Prior to 2008, there were many more, with some developers estimating nearly 750.
Grand Rapids has had only a one-month supply of housing for several years, according to data provided by the Greater Regional Alliance of REALTORS. This tracks how long it would take to sell all the homes on the market if no new homes were built and sales trends remained constant. This shortage can be traced back to the 2008 recession.
“New home construction slowed dramatically during the recession. When building activity resumed, a shortage of skilled labor limited the industry’s ability to meet growing demand,” said Julie Rietberg, CEO of GRAR, via email.
Before the housing market crash, mom-and-pop home builders were the bulk of the greater Grand Rapids market, said John Bitely, president of Sable Homes. These companies would build between one and five homes annually and remodel a few others. Tradespeople rotated jobs among several businesses.
“In the old days, they just bumped around from builder to builder,” Bitely said.
As prices peaked in 2006 and tumbled after, those small builders either found employment in bigger companies or left the industry entirely.
In Bitely’s 30 years in the business, the number of home builders has dwindled, while the average company has grown larger, now constructing between 85 to 100 homes annually.
This trend has a number of causes, Bitely said. Banks, understandably reluctant to give out large loans after the 2008 crisis, required businesses to put forward more start-up capital. Tradespeople now contract more with larger builders, as there aren’t enough small, mom-and-pop companies to make switching between building jobs a feasible option.
Zoning and permitting has also gotten more difficult, Bitely said, requiring more upfront cash.
At the beginning of his career, it would take about a year and a half to two years to go from buying a plot to a finished home. Now, after buying the land, it takes about three years to get started on construction.
Bitely said some degree of government oversight is necessary, but the current regulatory requirements are excessive.
“It’s crazy, layers and layers of stuff,” Bitely said.
These added hurdles translate into larger costs. The National Association of Home Builders estimates that over a quarter of the cost of building a home stems from regulations, about $130,000 per new home.
“That isn’t two-by-fours,” Bitely said.
Existing homeowners can also be hostile to new construction. The 30-year homebuilder said that everyone seems to want new housing, but protests if it’s anywhere near their home.
“There’s so much ‘not in my backyard,’” Bitely said.
The city of Grand Rapids is beginning an overhaul of its zoning code. ZoneGR is writing a first draft of its new zoning ordinance, which should be simpler to navigate and understand.
The proposed changes, while not yet finalized, should allow for more “missing middle” housing, like duplexes, triplexes and courtyard apartments.
| Write to juliana@grherald.com |
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