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A severe shortage of homes for sale in the US over the last several years has led to fierce competition among homebuyers pushing national home prices ever higher. But while home builders blame availability of both labor and land, a new report released earlier this week by the listing site BuildZoom suggests that builders perhaps just need a more “expansive” view when it comes to building in America’s congested cities.

The obvious solution to a shortage of available homes is to build more homes to meet the demand. However,US home builders say that since the housing bust a decade ago labor is in short supply, says BuildZoom. The industry has not been able to rebuild its depleted labor force, and so while there is an enormous demand for housing in the country, there aren’t enough qualified workers around to build them.

But even more worrisome, according to builders, is the availability of desirable lots. Developable land is plentiful in this country, but many lots aren’t necessarily situated in high-demand neighborhoods.

In other words, builders are running out of room to build new housing in many sought-after areas of America’s cities. Still, not all metro areas have responded to this perceived shortage of available land in the same way. Cities such as Austin, TX, and Nashville, TN, have adopted an expansive view of building, which has not only helped their downtown areas flourish, but also kept home prices in check, says BuildZoom.

Austin in particular has proved to be a very successful example of a more “expansive” model of building, which sees the suburban boundaries pushed out farther and farther over the years Over time, development gaps are filled in.

“One thing Austin makes clear is that urban revival can coexist with vigorous suburban expansion,” says BuildZoom.

But in many other “expensive not expansive” metros, such as New York City, new building has been in mostly “downtown clusters” where zoning permits high-density construction. These metros “stopped expanding” a long time ago, which in turn forces homebuilders to find buildable land in a fixed area, says BuildZoom.

As land becomes scarce, values skyrocket. Many developers will then build high-end “luxury” buildings that cost New Yorkers more and will increase developers’ profit margins.

“The wealthiest residents are the only ones who can buy, and a vicious cycle is created,” says BuildZoom.

Interestingly enough, lately in New York City there has been an oversupply of luxury units, giving homebuyers more bargaining power. And while landlords have been cutting prices and offering record levels of incentives to fill vacancies, the bigger pictures continues to be that many New Yorkers just can’t keep up with the rising rents.

“As long as these cities continue to do well economically, you’re going see poorer folks replaced by richer folks,” says BuildZoom Chief Economist Issi Romem.

This does not bode well for the millions of New Yorkers struggling to make ends meet in one of the world’s most expensive cities. “You’re going to read stories about teachers not being able to find place to live,” Romem adds.

Click here to read the entire report.

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