Where Have All the Houses Gone? … and how do we get them back?

By Lisa May
The Director of Housing and Consumer Affairs for Maryland REALTORS®

In the 1950s, game show contestants competed to answer the $64,000 question. In today’s Maryland, the real estate industry has an 82,000-unit question to solve. Namely, can we address a shortage of 82,478 houses statewide that has driven up housing costs and locked buyers out of the market? 

REALTORS®, builders, think tanks, and non-profits have proposed several strategies to encourage housing production, from regulatory reform to rethinking the home itself. Those ideas are starting to take root in Maryland at both the state and local levels. With REALTOR® help, more of those ideas can become a reality. 

Quantifying the Shortage  

The National Association of REALTORS® (NAR) made headlines when it released the “Housing is Critical Infrastructure” report in June 2021. The report’s lead researchers, The Rosen Group, noted that “the United States is in the midst of a severe housing shortage as a result of a persistent underproduction of housing.” Based upon this underproduction, the nationwide shortage has reached a staggering 5.5 million missing housing units.  

Maryland is not immune from this trend. Building upon NAR research and information from Freddie Mac, it is estimated that our state has only 96.5% of the housing stock it currently needs. That may sound minor, but when applied to Maryland’s existing housing total, we arrive at our estimated shortage of 82,478 houses.  

Unfortunately for homebuyers, this shortfall is expected to get worse with the current pace of new home construction. Maryland once again mirrors the nation in this area, decreasing production from 35,000 units annually in the mid-1980s down to just 18,000 new homes currently. 

Another look at our underproduction problem comes from NAR’s Housing Shortage Tracker. This online tool compares the number of building permits issued to the number of jobs created. A balanced market will provide one new unit for every two jobs added. Until recently, Maryland produced one unit for every three jobs. However, since the start of the pandemic and the resulting supply chain shortages, that rate has slipped dramatically to just one new home for every eight jobs created. 

Though shortages will eventually ease for building supplies, the availability of land that can be developed will not. Several Maryland counties are considered “built-out,” with virtually all land either already developed or in permanent conservation. Even areas with available land may not realize significant new levels of housing due to anti-growth sentiment, infrastructure challenges, or conflicts with other policy priorities like farmland or open space preservation.  

The traditional model of adding housing stock through large-scale subdivision construction may rapidly be ending. As a result, Maryland’s ability to close the gap will involve not just a renewed commitment to housing production, but also new ways of approaching where and how those units are provided. 

What’s Old is New Again  

One of the ways to plan for the housing of the future is to look to the past. One of those “old is new” ideas for housing is the Accessory Dwelling Unit (ADU). Taking a cue from the carriage houses or garage apartments of the early to mid-1900s, today’s ADUs are small dwellings located on the same lot as a main residence.  

In the last year alone, the cities of Annapolis and Frederick expanded the ability of homeowners to construct an ADU on their properties. Both noted in their approvals that ADUs are a useful tool to assist homeowners who wish to age in place in their current neighborhood. They can be used to generate rental income or to house a caregiver or the owner’s adult children. Most importantly, they provide a source of affordable and sustainable housing even in high-cost and established neighborhoods without the impacts to traffic or school enrollment that come from new subdivisions.  

According to Ileana Schinder, an architect based in Washington, DC, (ileanaschinder.com) who has worked on many ADU units and authored the book Housing for Humans, the rise in ADUs is more than an inventory issue, it’s the mark of a cultural shift. “People are interested in different types of housing, not just as an investment or to increase the value of the house, but they’re seeing their families differently, than they used to,” said Schinder. “Families are getting rethought. It’s not just a mom, a dad, and two kids. It could include a close friend, multiple generations. Owning a home on a large lot can be expensive.” Adding an ADU, then, might help to ease the responsibilities of homeownership.  

Another turn-of-the-century idea gaining acceptance is the conversion of single-family homes to duplexes, triplexes and quadplexes. Originally a staple of working-class neighborhoods in the Northeast, they fell out of favor in recent decades, comprising just over 1% of new housing starts. But that is starting to change. The city of Minneapolis and the state of Oregon have adopted zoning changes to allow these developments in areas that were exclusive only to single-family homes.  

This concept is starting to be incorporated into local comprehensive plans in Maryland. Montgomery County’s draft “Thrive Montgomery 2050” touts these units as a method to meet the need for “missing middle” housing as the county continues to grow. Likewise, both Howard County’s Housing Opportunity Master Plan and the draft “HoCo by Design” comprehensive plan explore duplex development to provide equitable and environmentally sensitive housing solutions. 

Getting Creative  

Local planners are also looking at non-traditional options for housing expansion. Repurposing old buildings for new uses, often referred to as adaptive reuse, is common in urban downtowns. Baltimore factories have been converted into new office spaces, medical suites, and artist studios for decades, and this trend continues today.  

With the decline of office and retail footprints in recent years, attention is now turning toward using those spaces for housing. The city of Hyattsville recently made CNBC’s list of the top ten cities converting former office spaces into apartments, with 338 conversion units created in the past two years. Other cities are exploring whether vacant offices or suburban shopping centers can be used as K-12 educational centers. For counties that impose development limits in areas with school overcrowding, adding student capacity is key to housing expansion. 

New housing types are also starting to emerge in Maryland. Queen Anne’s County has incorporated “cottage homes” as an allowed use in sixteen residential zoning districts. These units function as detached condominium units, allowing smaller and affordable options that more closely resemble single-family houses.  

Other takes on the traditional condominium are microunit apartments and Single Room Occupancy (SRO) units, which are private bedrooms with communal living spaces. With lower costs, micro-units provide an option for young singles who would otherwise need to share a larger dwelling with roommates. Meanwhile, SROs can serve as transitional housing for those experiencing homelessness. Downtown Washington, DC, has approved several micro-unit developments, and Montgomery County includes SROs in its “Thrive Montgomery 2050” draft. Both options are increasingly featured in densely populated and high-cost downtown areas. 

Building Inventory Through Action  

The time is now to incorporate some or all these options into local codes. At least 23 Maryland counties, cities, and towns are currently developing their comprehensive or small area plans, which are the first step toward designing housing for the next ten years and beyond. Working through your local REALTOR® association, industry voices can shape these proposals to spur housing production. 

At the state level, Maryland REALTORS® will continue the push for housing expansion under the Open Doors for Stronger Neighborhoods campaign. Open Doors was established in 2019 to bring awareness to policy makers of our housing shortage and the regulatory barriers that prevent us addressing it. This year, REALTORS® will support legislation to enable property owners to construct Accessory Dwelling Units on their properties, to reform condominium insurance requirements so that cottage homes are a viable housing option, and to promote the results of a state study on adaptive reuse of commercial structures in Maryland.  

That is not to say that these conversations will be easy. All the proposals mentioned in this article have and will continue to meet resistance from those opposed to housing growth or concerned about impacts on neighborhood character. REALTORS® are in a unique position to advocate for housing in their communities based upon their knowledge of where buyers want to live, what types of housing are in short supply, and which groups of buyers are not finding homes that meet their needs. 

There is no one proposal that will solve our housing shortage. It will take several, smaller steps that collectively close the gap. By speaking up and speaking out, our industry can begin to find answers to our 82,000-unit question and create the housing Maryland needs.