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Lennar Executive Chairman Stuart Miller On Fixing The Housing Shortfall

Stuart Miller on the Walker Webcast

If the U.S. is to solve its housing supply crisis, the homebuilding industry needs to embrace innovation and begin viewing housing more holistically, said Stuart Miller, the executive chairman and co-CEO of major homebuilder Lennar Homes.

Speaking on this week’s Walker Webcast, Miller said he views the three major segments of the housing market — single-family for sale, single-family for rent and multifamily — as operating on a continuum. Focusing on any one of these property types to the exclusion of the others won't solve the country’s housing shortfall, he said.

The homebuilding industry is doing what it can to address the shortage with the tools available. For instance, single-family builders are taking lower margins to make their homes more affordable, he said. 

But there are strong headwinds working against each segment of the residential market that, in the words of a recent headline mentioned by host Willy Walker, chairman and CEO of Walker & Dunlop, make the housing shortfall seem like “an impossible mess with no end in sight.”

Indeed, Miller said multifamily faces a looming slowdown in the construction of new apartments as the sector grapples with interest rates that have changed the dynamics of debt service and cap rates. And while observers had expected single-family construction to help stabilize the housing market, it faces the same issues that lower the value proposition of building new homes.

“The bottom line is they’re all stressed in certain ways,” Miller told Walker. “We've got to make up production of single-family for sale, single-family for rent and multifamily homes. And that means the longer-term prospects for our business, as long as we remain innovative and sensitive to affordability, actually remain pretty good for the industry.”

Walker said Miller’s viewpoint isn't the standard take on the housing market. He said the single-family and multifamily sectors historically have been “wildly segmented” by lenders and others.

But Miller said his industry needs to overcome those silos if it hopes to fix the problem. After all, that isn't how a group with a vested interest in making housing available for police, nurses, teachers and other members of the middle class tends to view the problem, he added.

“If you listen to the mayors and the governors, they need dwellings and they need attainable homes, whether it's rental or for sale,” he said. “They need places for people to live that are proximate to where the jobs are. They are agnostic as to whether it's rental or for sale. It's just got to be attainable for the people that they need to run their cities.”

Miller called it a shame that housing isn’t often talked about in a similar manner at the national level. Also not often discussed is his observation that the housing market is essentially a “zero-sum game,” in which individuals are continuously contributing to both the demand and supply sides of the ledger when they put a home on the market while simultaneously looking for a new one.

Willy Walker on the Walker Webcast

“That means that this shortage has to be filled by new production of single-family for sale or rent and multifamily homes,” he said.

Miller estimated that Lennar Homes is producing more than 70,000 homes annually. While that is a considerable number, the contributions of Lennar and its peers fall short of meeting the 1.5 million new homes that he estimated need to be built annually.

To help address the problem, he said builders need to look to innovation to help hold down costs for purchasers or renters. This could mean embracing modular or 3D homebuilding.

Or it could take the form of using new tools to help would-be buyers sell their existing homes, something that isn’t easy with today’s interest rates. Miller said Lennar has partnered with Opendoor to address this challenge.

“People come into our Welcome Home Centers and say, ‘I love your offering, but I’ve got a home to sell,’” he said. “We used to send them to a realtor and say, ‘When you sell your home, let us know.’ Now, we say we've got a solution. Opendoor will buy your home, enable you to purchase our home and we've got a transaction.”

Miller said the homebuilding industry needs to operate with an open mind, whether it concerns experimenting with new technologies or navigating the polarized political landscape, which he said isn’t actually polarized around this particular issue.

“It doesn't matter if you're talking to a blue or red governor or mayor. They all have the same refrain: ‘We need affordable housing,’” he said. “That's why when people ask me, ‘Are you a Republican or a Democrat?’ I say, ‘Neither. I'm a homebuilder.’ The bottom line is we need affordable housing across the country.”

On Nov. 15, the next guest of the Walker Webcast will be Thomas Nides, former U.S. ambassador to Israel and former managing director of Morgan Stanley. Visit here to register.

This article was produced in collaboration between Walker & Dunlop and Studio B. Bisnow news staff was not involved in the production of this content.

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