Build, Baby, Build
The Capital Region’s housing stock is among the lowest in the country per capita, while recent data shows that the population continues to grow. Something’s gotta give.
It isn’t unusual for large policy initiatives, even those that are good on the whole, to have lasting unintended consequences. The most recent recognizable example of this for most people is the current inflation we began experiencing mid-pandemic, and it continues today. The confluence of “cheap money” through low interest rates, robust stimulus packages, and ongoing supply chain issues has led to sharp increases in prices in most goods. Year-over-year inflation from February 2021 to February 2022, the US experienced 7.9% inflation; for context, for the same month in 2019 to 2020, we experienced about 1.5% inflation.
The housing market is no exception – over the past year, median sale prices for homes rose 10.5% in the Capital Region, significantly outpacing overall national inflation.[1] Rents saw an even bigger spike, with a two-bedroom 14.8% more per month than it was in 2021.
How did prices spike so high? It’s likely that in addition to inflationary pressures, Baton Rouge has one of the lowest housing stocks in the country. The table below shows the steep increase in price and dramatic drop in homes for sale over-the-year for the metro area overall, as well as the three largest parishes.
When you consider that the Capital Region has about 850,000 residents and had 1,112 homes for sale in February, that means we had 1.3 homes available per every 1,000 residents of the region. Nationally, there is about 6.3 months of housing stock available – in other words, if no homes were added to the market, based on average sales volume housing stock would not run out for over six months[1]. For the Baton Rouge metro, we have 1.0 months of housing stock; if building stopped and no one sold their existing home, we would run out of homes for sale within a month. Ascension’s 103 homes on the market in February cited above qualifies as 0.5 months of stock, meaning that if residential building halted and no one sold their homes, there would be nothing to purchase within 15 days.
This housing scarcity is likely pushing housing prices even higher than there would be with inflation alone. The 10.5% increase in regional median sale price is significantly steeper than the 7.9% overall inflation number. While these prices are an issue in a vacuum, they are especially an issue in a tight labor market where attracting and retaining talent in a region is crucial. If young professionals are priced out of the housing market – if they can’t afford an apartment upon graduation or are unable to buy a house in order to grow their families – they will move to a metro area that’s able to accommodate them. Considering that Baton Rouge has about twice as many open jobs as residents actively seeking employment, the Capital Region can’t afford that sort of outmigration.
With the housing market as it is, what can be done to attract and retain talent, which consistently ranks as the number one issue for employers regionally and nationally? Data shows that in terms of housing, young professionals prefer walkability, density, and the “feel” of neighborhoods. Continued development of downtown, revitalizing disinvested neighborhoods, and bringing blighted properties back into commerce are all potential parts of the solution.
[1] Greater Baton Rouge Association of Realtors, March 10, 2022