Solutions are slowly emerging as builders attempt to deliver housing that meets the strong demand from middle-class Americans who struggle to afford a home purchase.

Middle-class households earning $100,000 or less annually represent a vast proportion of the U.S. population, and this means they typically are limited to buying homes priced between $200,000 and $350,000, said Adam Ducker, senior managing director and director of urban real estate and public strategies at RCLCO Real Estate Advisors.

Even though demand is strong, builders are constructing very few homes at the low end of the price range, said Ducker, who called the situation “a significant mismatch” between supply and demand.

Ducker told an audience at the 2020 ULI Housing Conference in Miami in February that the problem is not confined to urban coastal markets. “This is a universal problem in all parts of the nation,” he said.

Finding ways to reduce land costs is one key to delivering attainable housing.

One Florida developer, Miami-based 13th Floor Investments, discovered a bargain-priced niche of land inventory—underused golf courses, said Michael Nunziata, division president of the firm’s homebuilding company, 13th Floor Homes.

The redevelopment of golf courses, which typically cover more than 100 acres (41 ha), requires extensive communication and political negotiations with nearby homeowners and community officials, Nunziata said. But the firm has registered strong sales by building attainable single-family houses on narrow lots less than 30 feet (9 m) wide on land that used to be fairways and putting greens.

“Anything under $500,000, you’ll move. It flies off the shelf. We’re selling 10 to 12 a month,” Nunziata said. “We identified several other golf courses here in South Florida. It’s where you find land in a land-constrained market.”

With golf decreasing in popularity, the supply of former golf course acreage is deep and the locations can be excellent suburban sites. “We have a guy in our office who has called every golf course in the state of Florida,” Nunziata said.

EYA, a residential developer based in Bethesda, Maryland, has turned to the redevelopment of commercial property such as retail centers to produce residential construction sites, said Bob Youngentob, chief executive officer of EYA. In the e-commerce era, retail outlets are closing, leaving vacant stores and parking lots available for redevelopment.

Youngentob’s firm, which specializes in townhouses and condominiums, has worked to find ways to reduce home prices to attainable price points.

“For hard costs, one of the biggest drivers is square footage,” Youngentob said. “So, for the millennials we’ve gone to much smaller footprints.”

At EYA’s Riggs Park Place development in northeast Washington, D.C., the firm is building 14-foot-wide (4 m) townhomes with two bedrooms and 1,200 or 1,300 square feet (112 or 121 sq m) of living space. The 90 townhouses there are priced at $550,000 and up.

Homebuyers are willing to compromise to attain homeownership, according to RCLCO research, which says that, to be able to buy a home, 49 percent of consumers would settle for a smaller lot; 37 percent would buy a smaller home; and 21 percent would buy a house with lower-quality finishes and appliances.

“Is there a way to bring down the cost of construction either by what’s included, by the nature of the construction type, or by other strategies to simply make the home more attainable?” Ducker asked. “Through our consumer research, buyers tell us they are open to it.”

Youngentob said that EYA conducted a thorough internal review of construction costs, seeking an antidote to a trend that pushed its construction costs up to about $125 per square foot ($1,345 per sq m) from $90 per square foot ($968 per sq m) years earlier.

“As part of this strategic effort to bring our cost of our housing down to a more attainable level, we started to look at every one of our finishes, every one of our details in our construction—our HVAC design, our structure design,” Youngentob said.

Even though EYA, as a midsized builder, does not have the massive buying power of a national homebuilder, the company found ways to save by reducing the options for buyers and sourcing high-quality materials at lower costs.

“Vinyl hardwood floors, for example,” Youngentob said. “We went back to a vinyl hardwood that was introduced a couple of years ago without any resistance whatsoever—but half the cost,” he said.

On a national level, the market has been slow to move to high-density housing such as townhouses and condos to address affordability. Of the 383,000 multifamily starts forecast by the National Association of Home Builders for 2020, some 93 percent will be for rental housing and only 7 percent will be for-sale homes.

Ducker said, “In America, we’ve become quite accustomed to large homes. In the last recession, there was a great deal of discussion around shrinking the footprint of for-sale housing in America. In fact, the opposite has happened over the last decade.”

Density could be an answer, but homebuilders tend to stick to familiar models, producing what they have long relied upon for profitability.

An obvious response to affordability (demand) is to find a way to push density, Ducker said, “but the homebuilding industry in the United States today is more focused on single-family housing than it’s been in the last several generations.”

RALPH BIVINS is editor of Realty News Report, an online publication covering southwestern and national real estate news. He is the author of the 2019 book, Houston 2020: America’s Boom Town—An Extreme Close Up.