Central Ohio homebuilders far shy of meeting high demand

With demand for central Ohio homes at record highs, and the number of homes on the market at record lows, the stars should be perfectly aligned for central Ohio homebuilders.

But builders haven’t gained traction since the housing recession of a decade ago for one primary reason: Most buyers can’t afford what the companies are building.

The median price of a new home in central Ohio topped $350,000 last year — almost twice the median cost of an existing home. That gap between new and used is one of the highest in the country and well above the national gap of 35%, according to Metrostudy, a firm in Washington, D.C., that tracks the building industry.

"Prices are just really on a tear for new homes in Columbus," said Mark Gianopulos, director of Metrostudy’s Midwest region.

Such prices have kept builders from exploiting what should be ideal conditions: enormous demand for homes, coupled with incredibly few homes for sale.

Last year, central Ohio builders sold 2,691 new homes, up 3% from the previous year but fewer than a third of the number sold during the boom years of 2002 through 2004, according to Binns Real Estate Services, a Columbus company that tracks the new-home industry.

"We should be at 5,000 homes or more," said Robert Schottenstein, chief executive officer and president of M/I Homes, the area’s second-largest builder after Pulte Homes. "We’re seriously undersupplying the market."

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Last year, according to Metrostudy, 14,991 new homes were sold in Austin, Texas, 10,567 in Charlotte, 8,014 in Raleigh/Durham and 4,721 in Indianapolis.

New homes also cost less in those cities. For example, the median price of a new home in Indianapolis last year was $292,962.

Central Ohio builders know that they have a price problem. The median price of a new home here last year was $350,525, up from $259,900 five years earlier, according to Binns. (Metrostudy placed the median price last year even higher, at $377,900.)

"It’s really difficult for a builder to buy land, turn it into a community and build a new home anywhere near what it used to cost, or what a similarly sized home for resale can sell for," said Jon Jasper, president of Fischer Homes’ Columbus division.

Builders point to the rising price of land, labor and material (especially lumber), but they also say that regulations prevent them from building more-affordable homes.

Density regulations, which in many communities prevent building more than three or four homes per acre, along with minimum lot sizes push the price of new homes out of reach of many buyers, builders contend.

"We have a huge demand our builders want to meet, but for a variety of reasons, they’ve been prevented from doing that," said Jon Melchi, president of the Building Industry Association of Central Ohio.

"If these communities want to attract businesses, they need to have housing stock for those workers," Melchi said.

Builders say that if they could put more than four homes on an acre and build on 50-foot-wide lots instead of the minimum 70 feet required in many municipalities in central Ohio, they could build homes that are more affordable.

"It’s almost impossible to find a 50- or even 60-foot lot anymore," Schottenstein said. "You can put a 2,800-square-foot home on a 50-foot lot. You don’t need a 70-foot lot."

Schottenstein said an M/I home that costs $350,000 in Austin costs about $400,000 in Columbus because Austin allows denser neighborhoods. He and other builders point out that some of the highest-priced neighborhoods in central Ohio — German Village, Grandview Heights, Bexley and Clintonville — allow far smaller lots and greater density than most other area suburbs.

Builders also maintain that the process of getting land approved for building has grown more extended, putting them several steps behind market demand.

"From the time I shake that farmer’s hand to buy the land to the time I build the first house can be five years, given the permitting process," said Don Wicks, president of Rockford Homes.

"In the past, you got your zoning and dealt with inspectors, and it was over."

Some municipalities are aware of the concerns and seeking to address them.

Orange Township in southern Delaware County is working to update its zoning code to allow higher-density development, said Michele Boni, the township’s planning and zoning director.

"We’re getting more applications for higher-density development," she said, "and we understand that’s what the market wants and where the trends are, but we don’t have anything in our code that allows that now."

The township’s residential code allows for no more than two homes per acre and a minimum lot size of 75 feet wide by 135 feet deep.

"I would like to see more flexibility with that, although I hope we could narrow it down to specific areas," Boni said.

"I wouldn’t want it for the entire township," she said. "We have traffic concerns as is, and we don’t want to add any more students than we need to to Olentangy schools. But we understand there’s a need for more density. We know central Ohio is growing and people need a place to live. … We’re trying to learn how we can accommodate that to make sure it’s not a complete urban sprawl."

Builders, too, share some responsibility for the high cost of homes. They are choosing to build most subdivisions in southern Delaware County, where land prices are among the highest in central Ohio.

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