The construction industry in Tampa Bay is booming with developers working to meet the high demand for new homes. But there’s a formidable challenge at play – a scarcity of available lots. This issue isn’t specific to Tampa Bay, it’s a problem for builders nationwide.
According to a recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index survey, approximately 67% of single-family builders nationally reported some type of shortage in the supply of lots. While this figure represents a slight improvement over the 2022 survey, it’s the second-highest incidence of lot shortages since NAHB started collecting data on the topic in 1997.
The number of builders reporting lot shortages is especially high based on the current level of production. Despite high demand nationally, housing starts have hovered around an annual rate of 1.4 million over the past six months, compared to 2005 when total housing starts were over 2.0 million and 53% of builders reported lot shortages.
One major factor that that’s contributing to the shortage of lots nationwide is the availability of credit for developers. Acquiring loans to develop new residential lots has become increasingly challenging and expensive over the past year. Limited access to financing restricts the ability of developers to meet the growing demand for housing. Government regulation also plays a role in the shortage of lots. Lengthy and complex regulatory requirements slow down the lot development process and increase costs. A recent NAHB study shows government regulation accounts for about 42% of the cost of a lot for the average, new single-family home. Streamlining these regulations could help expedite the development of new lots and alleviate the shortage.
Parts of Tampa Bay have another unique issue: most of Pinellas and Hillsborough counties are already built out; there isn’t much vacant land. There are also environmental concerns when it comes to the area’s wetlands.
Of course, the impact of lot shortages extends beyond the construction industry. It affects potential homebuyers as well. The limited supply plus constant demand for housing – especially in Tampa Bay – leads to higher prices for available homes. And as competition intensifies, prices go up even further.