Construction workers do excavating for new homes April 20, 2021 on Holland Drive in Bloomington. Staff photo by Rich Jn=anzaruk
Supply and demand
In theory, a greater supply of homes should, if not lower housing prices, at least reduce the speed at which housing costs rise: If you have 100 home buyers and 10 homes, prices will be higher than if you had 100 home buyers and 200 homes. The idea in Bloomington: If you make more plots of land available for greater density, by allowing duplexes where previously only single-family homes were allowed, you increase the supply of living spaces. If a homeowner or developer turned a single-family home into a duplex, the same space would have at least one more occupant than before. That one additional occupant wouldn’t need compete for a home elsewhere. And if you do that enough, say, by turning 100 single-family homes into 100 duplexes, you’ve taken 100 additional buyers off the market. And those 100 fewer buyers won’t compete for other homes or duplexes or apartments elsewhere, so that, eventually, homes will see fewer offers, which should, if not lower prices, at least slow the pace of appreciation, even at entry-level prices.
EDITOR’S NOTE: This is the seventh installment in a multipart series on the local housing market.
The addition of more houses, including duplexes, should put downward pressure on prices, according to more than half a dozen economists and housing experts interviewed by The Herald-Times.
However, some academic research suggests upzoning, or allowing greater housing density, causes land prices to rise and displaces low-income earners.
Two Indiana University professors also warn tinkering with complex systems can produce unintended and potentially irreversible consequences.
The Bloomington City Council recently began public hearings on proposed local zoning changes, the most controversial of which would allow duplexes in many neighborhoods that in the past few decades have allowed only single-family homes.
Proponents of the zoning changes, including Mayor John Hamilton, city planning staff and some city council members, argue allowing people to turn single-family homes into duplexes will increase the local housing supply, which should lower prices and offer more people opportunities to buy a home. Proponents also say greater population density near the city center — rather than on the fringes or even farther away — also would reduce the city’s carbon footprint because more people could walk or bike to work, shops and restaurants.
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